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August 24, 2012 02:00 AM

Haitian International Holdings targets application engineering

Steve Toloken
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    Helmar Franz in Haitian's Ningbo, China, plant

    HONG KONG (Aug. 24, 2:40 p.m. ET) — China's Haitian International Holdings Ltd. has seen its annual sales more than double in recent years to about US$1 billion, joining the ranks of the world's biggest injection molding machinery suppliers.

    Now the firm said it's increasing attention on some of the softer skills needed to keep climbing that ladder, like establishing a technical center to do more sophisticated applications engineering.

    Haitian, based in Ningbo, is “investing heavily” in the engineering resources needed for application development in specific markets, something that's less common in China, a senior executive said in a news conference and follow-up interview in Hong Kong after the company's Aug. 21 release of its latest financials.

    “We are trying to adopt such application knowledge,” said Helmar Franz, executive director and chief strategy officer. “It is something that is new and is part of all the top technology companies, but in China is quite unusual.”

    It means the company, which is China's largest maker of injection machines, wants more knowledge of end markets, new material opportunities, and developments in mold technology, robots or other auxiliary products, said Franz, who was the top executive at Germany's Demag Plastics Group before joining Haitian in 2005.

    The application center's main focus will be research and development, and system integration.

    “If you don't have application knowledge, such knowledge will rest with the customer, you will never know it and you will only get it during the order, and your delivery time is very long,” Franz said. “When they normally talk about foreign technology, they talk about applications. This is why we want to invest in this, because it takes some time.”

    He acknowledged challenges in staffing the new initiative.

    “This is the main issue: In China, unfortunately, there are not a lot of application engineers,” he said. “They are strong in the production sector and also have a quite strong scientific sector, but in between they don't have the applications.”

    The company estimates it will have 20 application engineers when the unit is fully operational, though the number could change depending on availability of qualified staff and other factors, he said. The investment will also include an application-oriented technology center.

    “We have no specific budget, because it is part of the R&D budget, and given the importance of this issue, money will be allocated as required,” he said, noting that discussions of the initiative are ongoing.

    The change is part of other tweaks in its R&D outlined for analysts and journalists. Those include having more R&D focus by specific teams in each of its three major brands; beefing up its ability to deliver more integrated packages with auxiliaries, robots and molds; and reformulating product development and market analysis into more “microsegments” to develop machines for specific industries and customers.

    Haitian has recently announced technology-based initiatives, such as striking a deal with U.S. firm Trexel Inc. to sell its foaming technology in key emerging markets of China, Vietnam, India, Brazil, Turkey and South Africa.

    As well, the company's German subsidiary, Zhafir Plastics Machinery, in late 2010 unveiled its Mercury series, which it positions as a high-speed, high-tech press. And Haitian was an early adapter in China of energy-saving technology in its Mars series, which has sold more than 65,000 units and become the workhorse of its sales.

    Franz said Haitian has about 400 engineers in total in its R&D department in China, plus 16 more permanent staff and specialized help as needed at Zhafir in Germany.

    The company has been hit by China's market downturn, with sales dropping 14 percent overall in the first half of the year and 21 percent in China.

    But it pointed to increased sales of higher-tech products, such as its all-electric Venus series and two-platen Jupiter models, as evidence that it's making gains with its R&D.

    “We regard a challenging operating environment as a tremendous opportunity,” said Zhang Jianming, executive director and chief executive of Haitian. “Our cutting-edge Generation 2 [machines] … are expected to trigger demand for [plastic molding machines] even under tough market conditions, laying an important foundation for long-term growth.”

    For all the focus on technology, Franz also acknowledged challenges in one of the firm's goals, replacing the imported machines that take a large part of the upper-end of China's market.

    “Not because of the technology — I thought it was technology and price — but it looks like it is to a considerable amount, it is image and maybe I'm a little bit surprised about the impact of it,” Franz said. “The people don't trust the Chinese development and the worst in this is the Chinese.”

    He compared it to the popularity of foreign-brand cars in China. Foreign cars, including those made in China by foreign joint ventures, had just over half the country's market of cars and light vans last year.

    “When Chinese get rich or get a little bit of money they buy some imported products,” he said. “Of course this does not help their local industry develop. This is something I observed and I think this is negative. I hope it can be overcome.

    He said that while the stigma associated with Chinese-made plastic machines has disappeared in some European countries, he argues that it remains unexpectedly stronger among mainland Chinese and to a certain extent Taiwanese firms.

    “We were thinking it would be a little easier, however the precautions look to be even larger, than for instance for American- or European-owned companies,” he said.

    However, he said Haitian feels it's been successful targeting the markets of foreign brands in China, and said it's working on ways to combat the negative attitudes: “We are already thinking how to counter this.”

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