Spurred by rapidly growing demand in China's health-care market, U.S. specialty tubing maker Precision Extrusion Inc. has opened a joint venture plant in the eastern China city of Hangzhou.
The small Glens Falls, N.Y., firm has seen its China sales grow from negligible levels five years ago to about 20 percent of revenues, as the Chinese government has significantly boosted spending on health care, Precision President Michael Badera said in an April 16 interview at the China International Medical Equipment Fair in Shenzhen.
Precision holds a majority stake in the venture. Its Chinese partner, Tong Xiang Peng Yi Ltd. — a small, private investment firm in Tong Xiang — holds a minority share, Badera said. He declined to disclose details.
“Certainly investment-wise it was a multimillion-dollar investment,” he said.
The joint venture, which started production earlier this year, is called Hangzhou Peng Yi Precision Catheter Technology Ltd. The 58,000-square-foot factory has extrusion lines, braiding equipment, post-extrusion finishing lines and a 12,000-square-foot clean room, he said. The company plans to double the size of the clean room next year.
Badera said China's medical-device makers want to manufacture better-quality products like catheters, and the country's hospitals have directives from the government to buy more locally made goods. That is why Precision is making the investment, he said.
However, China lacks domestic capability to make some of the higher-tech components Precision manufactures, such as IV and braided catheter tubing, Badera said. “We're sticking to our high-technology specialty products but [the factory] is not a direct copy in that we're not going to try to do everything we do in the United States,” he said.
In 2009 China launched a government initiative to spend about US$125 billion to create, by some accounts, universal access to basic health care and to significantly improve health care in rural areas. That spending, Badera said, is providing an impetus for Precision's local Chinese customers.
“From what we've heard from our customers, the demand is doubling every two years,” he said. He noted that the firm projects it will outgrow the Hangzhou facility by early 2013. “The growth is almost too much to believe.”
The Hangzhou factory is expected to supply products to other Asia-Pacific countries where Precision has customers, including Japan, South Korea and Australia, Badera said. But the joint venture probably will not export back to the United States for at least the next three to five years, given the demands in Asia, Badera said.
The facility eventually could start to manufacture some of the firm's catheter balloons and have operations for applying lubricious coatings, which make the catheters easier to insert into the body, he said. The plant is located in the Hangzhou Economic and Technology Development Area, a giant industrial park outside the city that provided Precision some grants to help defray rental costs, he said.
The joint venture also is considering expanding production beyond components into finished goods, and eventually doing an initial public offering.
Precision Vice President Rosy Wang, a native of Hangzhou and longtime Precision employee, is the chairman of the venture.