Shanghai — Solvay Engineering Plastics is beefing up its testing operations in China to better support its Asian clients.
Currently Asian clients send parts to be tested at Solvay's testing lab in Lyon, France, which causes a delay in the testing for 25 percent of the products. In order to address that, Solvay plans to launch an application performance testing center in Shanghai, the first outside of Europe, by the end of the year. Solvay Engineering Plastics General Manager Peter Browning estimates that the testing turnaround time will be improved by 20 to 50 percent.
The new lab also will bridge the language gap that currently exists between European lab technicians and Asian customers.
“Now what we'll be doing is having a local parts-testing facility with a local team that will be able to work with our local customers in their own language. It makes it much easier to understand,” Browning said.
“Over time what we've seen is the demand on [our] laboratory grows very rapidly with the compound growth rates of 25-30 percent each year. Over the last five years we've seen a lot of that work coming from Asia, particularly China. The logical next step was to set up a satellite lab with a number of capabilities that we have in Europe, duplicating our capacity and increasing our capacity worldwide, but doing it in two separate places.”
Solvay currently has an R&D center in Shanghai with a few hundred employees. “We're using existing infrastructure and just dramatically increasing our presence and our ability to serve our customers here.”
The decision to make the testing lab in Shanghai was a relatively straightforward one, Browning said. “My commercial director told me that one of the key barriers for him to grow his business was that parts testing was taking too long. I said that's a reasonable business case. They came back to us in March with a recommendation. We gave them the money in 24 hours.”
Key end markets
“There is a strong focus on automotive,” Browning said, although there are a lot of metal-replacement applications in the consumer goods sector as well. “80 percent of our testing is from the automotive industry.”
Once the metal-replacement testing is established, he said, “The second step will be around thermal management, heating and cooling and then we'll move on to electrical protection, which is more outside of the automotive market. We already have in Shanghai a world-class facility for UL certification [for flame retardancy].”
Browning noted one of the key challenges for Solvay is managing capacity. “The one region in the world where I don't want to run out of capacity is here in Asia. I want to make sure we always have more capacity then the markets need. The markets [here] are much less predictable. We tend to go from feast to famine to feast. Last year, in the third quarter, everybody in China decided there was too much inventory in the value chain and they stopped buying and then in Q4 everybody started buying again. We have a responsibility to make sure we're ahead of that. That's how we can generate really interesting growth.”
Solvay is not feeling the effects of China's “new normal,” according to Browning. “It represents an opportunity. The average wealth level is much higher, the average level of sophistication is much higher, the average willingness to pay for the services I provide is higher. Where Solvay serves is in high-end auto, smart devices, high-end electrical systems, and I think the opportunities to grow through innovation are as strong here as they were last year or five years ago. That's really where we're targeting as a company. When we stop innovating we stop creating value.”
Browning hinted at a future investment for Solvay. He said the company is looking at opening a new manufacturing facility in a different part of the world, but he would not elaborate with any details.