Small Chinese mold makers struggling

Guangzhou, China — A shakeout is looming in the Chinese mold-making industry, as a roiling economy and customers' increased demand for high-quality molds wrings out overcapacity.

That was the key crystal-ball prediction of executives at this year's AsiaMold fair, held Sept. 15-17 in Guangzhou.

“It's not easy to make a living in this environment,” observed President Gavin Fung of E-Mould Plastic Technology (Shenzhen) Ltd., which designs and makes molds and runs an injection molding shop. Speaking through an interpreter, he predicted that “many small mold makers will disappear because of the slowing economy.”

Although this summer's yuan devaluation was too recent to have registered on bottom lines yet, Fung anticipated that the “devaluation will help our exports, but it will also hurt us because we buy imported machines.”

Last year, E-Mould posted sales of 170 million RMB ($27 million), mostly to the automotive and consumer electronics industries. It has 460 employees.

“Our business is stable,” said Frank Liu, vice president at Topwell Spring Development Ltd., which, like E-Mould, has headquarters in Hong Kong and a factory across the border in Shenzhen. “Domestic sales are slowing, but retail consumption on the mainland will flatten the decline,” Liu said.

Topwell, offers design, mold-making and manufacturing services, with specialties in painting and in-mold labeling (IML). Clients include Samsung, NEC and LG. Annual sales are about 200 million yuan ($31 million).

While the injection molding business is slightly down — Topwell runs a fleet of 65 machines — the mold making business remains firm, with customers placing 50 orders this month, Liu said.

Topwell's workforce peaked at 600 in 2004, but management anticipated the rising cost of labor and made the transition to more automated systems, Liu said. Today's workforce is 400.

Despite the geographically ambitious name, Asiamold has the feel of a smallish, local show. A 10-minute stroll around the show floor reveals that almost all the companies showing are from the Pearl River Delta. As at last year's show, a few companies and trade groups hail from overseas, notably Taiwan, Germany and the United States.

“This year the whole economy is slower, especially the die-casting and the injection mold business,” said sales manager Della Lu of Shenzhen-based PE Mould Industrial Ltd. While PE Mould (30 million yuan in annual sales, or about $4.7 million) realizes 55 percent of its annual sales in the United States, Lu detects a growing preference by U.S. customers to buy domestically, while a sluggish European economy is hurting sales there.

Like others here, Lu predicted that many smaller toolmakers without deep pockets won't be able to withstand the slowing economy, although a few may be able to hang on by competing aggressively on price. “For customers without strict quality control, [small mold makers] are still attractive,” Lu said.

A handful of automation and auxiliary-equipment vendors were exhibiting at this year's show, including Guangzhou Start to Sail Industrial Robot Co., which offers robot arms for the injection molding industry, welding robots, stamping robots, software and customization services. Speaking through an interpreter, general manager Yan Liangjun, foresees growth opportunities as cost-conscious companies aggressively automate. “As labor costs go up, manufacturers demand our products more,” Yan said.

STS is owned by a large state-owned firm, but Yan said many smaller robotics firms will fail as the economy slows — and that wasn't necessarily a good development.

“Smaller robot companies are often leaner and hungrier. Their loss will hurt the industry,” he said.

Fair sponsor Messe Frankfurt offered a much beefier 3-D printing area this year, with 59 companies exhibiting, up sharply from last year's 32, and dozens of marketing and technical presentations.

Firms exhibiting included the Chinese branches of U.S. heavyweights 3D Systems Inc. and Stratasys Ltd. Judging from the myriad action figures on display in tiny booths, though, most of the exhibitors were targeting the hobbyist, art-school and low-cost prototyping markets.