HONG KONG (Dec. 11, 2:50 p.m. ET) — One of Hong Kong's largest plastic injection molding companies, Vigor Precision Ltd., is leading an effort with the Hong Kong government to develop what they say will be China's first locally owned airline seat manufacturing business.
The project recently unveiled its first seat, for the Airbus A340, and hopes to expand that to seats for Boeing and other commercial jetliners, and to other non-critical aircraft parts, including trolleys, crew seats and toilets, all of which use plastics components.
Vigor Executive Director S.W. Wong details his
Vigor is the lead company in the project, which in its research phase has spent HK$11.6 million (US$1.49 million), with 85 percent of that coming from the Hong Kong government.
Hong Kong officials say it is part of their strategy to help small manufacturers beat cheaper competition from mainland China and elsewhere, and move into higher-tech, more profitable markets.
The consortium showed the A340 seats, which it says meet all international aviation industry standards, at a Nov. 14 news conference in Hong Kong.
Airline seats may seem an odd move for a plastics company, but Vigor, which employs 2,000 people and has more than 200 German and Japanese molding machines in three Chinese factories, sees it as a natural evolution.
Each chair has about 30 injection molded plastic parts, although plastic is not the key technology. Instead, Vigor said what will be most valuable is its expertise in precision manufacturing and assembly.
“The seat is not a high-tech product but it is a high-quality product,” said S.W. Wong, who is executive director of both Vigor and the aviation consortium. “You have to pass the [airline industry requirements] from material, from design, from workmanship … It has to be as light as possible but at the same time you have to be as tough as possible.”
The consortium, called Universal Aviation Industrial Ltd., is a partnership of six Hong Kong companies, with Vigor owning 56 percent.
The companies will spend about HK$20 million (US$2.57 million) of their own money to set up manufacturing, beyond the research funding.
Universal expects to launch commercial production in 2013 in space at one of Vigor's injection molding factories in Dongguan, China, said Henry H.H. Chan, president of both Vigor and Universal.
The company plans to start small, with aftermarket seats for the A340.
It sees its initial advantage as cost — it expects it can trim 30 percent off the price offered by the European, North American and Japanese suppliers that dominate today, Chan said.
Initial production capacity will be 200 to 500 seats a year, he said. That's not a huge number, but each pair of economy class airline seats sells for US$10,000, and one business class seat can have a US$35,000 price tag, Chan said.
Hong Kong-based airline Cathay Pacific supplied the A340 seats that Universal reverse-engineered for its own model, and Cathay executives have been vocal about their frustration with high costs in the aviation industry supply chain in recent years.
Universal said at its November press event that it planned to initially focus on Hong Kong's airline industry, including Cathay Pacific, Dragon Air and Hong Kong Airlines.
Cathay typically buys about 300 A340 replacement seats a year for its planes, and in the past those orders have typically gone to U.S. and Japanese suppliers, Universal executives said.
But after more market research, Universal officials now say they will broaden their focus to low-priced Asian airlines, rather than the Hong Kong market.
Universal wants to broaden to other aircraft as well, and hopes in time to be certified directly by the aircraft makers for new planes, rather than focusing solely on airlines and aftermarket seats, Chan said.
Still, it will be a challenge, executives said.
“The world market… is very big, very competitive, and many countries want to protect their domestic manufacturers,” Chan said. “It is quite difficult.”
Project officials said a recent slipup by an established supplier may provide an opening. Japan's Koito Industries admitted last year it falsified test results on up to 150,000 seats on 1,000 aircraft, causing delivery delays for some Airbus and Boeing planes and major financial problems for the Japanese supplier.
As well as global markets, the partnership is focused long-term on China.
Demand is growing rapidly there and in Asia. Airbus in September forecast that worldwide demand for jetliners of more than 100 seats would double from 15,000 today to 31,500 by 2030, with 34 percent of the new demand in Asia-Pacific, 22 percent in Europe and 22 percent in North America.
China has made the development of a domestic passenger jetliner manufacturing industry “one of the major initiatives” in its current Five Year Plan, said Joseph Poon, director of technology development with the HKPC.
He said Hong Kong's manufacturing companies need to look for more demanding industries like aviation, in part to cope with higher labor costs and a rising Chinese currency that have made it very difficult for many of them.
“We have to look for opportunities that take the industry to a higher level,” Poon said. “That means industries with tighter regulations, with higher value.”
HKPC Chairman Clement Chen said at the press conference that Hong Kong lags behind competitors in Asia, including Japan, South Korea and Taiwan, in support for development of industries like plastic.
The HKPC plans to expand the effort into other non-critical components.
“Our next target will be to develop some major structural parts for local production for further cost reduction, and to support the industry to diversify into manufacturing other in-cabin products,” such as trolleys, toilets, kitchens, storage cabinets and crew cabin seats, Chen said.
Those involved in the project see it as a long-term endeavor, with Wong drawing parallels between Vigor's history with gears and the aviation venture.
When Vigor started in 1982, precision plastic gear manufacturing was dominated by the Japanese, and there was a lot of skepticism about a new entrant from Hong Kong getting into the toy market, he said.
“At the beginning, McDonalds and Mattel, they didn't believe that Hong Kong guys could make the gearbox, particularly the small ones, where you have gears like watches,” Wong said. “It took us four or five years to convince them to give us a try.”
But by the 1990s, Vigor was one of the world's largest suppliers, and has since developed its technology into precision plastic gears for automobiles, electronics, medical and other higher-end markets, Wong said.
Those involved in the project hope that same long-term focus will pay off in aviation.
“It's a gradual transition,” said Thomas Kwok Keung Lee, an HKPC engineer who is advising the seat project. “You start with the aftermarket, you establish a track record and then you can consider the OEM market. Boeing or the other airline companies will not consider you if you don't have a track record.”