2011 was a tough year for Japanese injection molder Hakkai Co. Ltd., with flooding in Thailand destroying its factory there and the country's March 11 earthquake and tsunami posing other challenges.
But the company is working to recover. It's close to restarting its Thai injection molding plant, where it had 60 injection presses, and it's building a new $5 million molding factory in Suzhou, China, its first in that country.
While the investments come at a time of softness in the global economy, Hakkai President Akihiko Seki said he's trying to steer the company beyond its Japanese customer base to make it less vulnerable to the shocks Japan's economy absorbed in the last year.
“You know what happened last year in Japan [with the earthquake and tsunami] and there was a flood in Thailand, and also the Japanese yen is very strong,” said Seki, in an interview at his company's booth at NPE2012, held April 1-5 in Orlando. “It's killing the export business.”
Hakkai, based in Minamiuonuma, focuses on precision micromolding for the electronics industry. It's putting the factory in China because of increasing demand from its Japanese customers there, even though manufacturing costs are rising rapidly there, he said.
“Many people are asking me why [build in China] now, the labor costs are going up in China and the economy is not going down but it's kind of slowing down,” he said.
“Maybe I'm looking at China from a different point of view,” Seki said. “What we specialize in is micromolding, very [precise] things that you cannot find in China. We are not really a labor-intensive business.”
The Suzhou factory is a $5 million investment that will start with 10-20 injection presses and about 20 employees.
He said he hopes to grow it to 100 molding machines in five years, which would make it roughly the same size as its Japanese headquarters factory, where it has 150 injection presses and 190 employees.
The company is also close to rebuilding its factory in Ayutthaya, Thailand, which was submerged under more than 6 feet of water during last summer's flooding in the country. Those floods knocked large parts of the country's manufacturing industry out of commission.
Hakkai had 60 injection molding machines and substantial mold-making equipment there, he said: “All of that was gone.”
He said the company had insurance but still had to lay off 150 of the facility's 250 employees. It's now rebuilding its labor force and by the end of April will be at 70 percent of its pre-flood capacity, he said.
Many of its customers, including global electronics giants, have now substantially recovered their production there, but have also decided to shift some production away from Thailand to reduce their own vulnerability to future disasters, Seki said.
Hakkai, for example, makes Apple iPhone parts in its Thai factory, but Apple has been telling its suppliers to reduce their risk to future flooding, he said.
“Directly and indirectly I had a lot of impact from the Thai flooding,” Seki said. “What I found out from the Thai flooding is the supply chain is really complicated these days.”
The company was exhibiting at NPE in part to try to broaden its customer base, he said. The firm is trying to do more work in medical and automotive sectors, and sees some potential in the U.S. now.
“The U.S. economy is picking up,” he said. “This is the reason I'm here.”