Chinese mold maker TK Group (Holdings) Ltd. is laser-focused on North America, seeing both opportunities for new business and significant challenges from the threat of a trade war between the U.S. and China.
The opportunities include growing demand for its molds from the auto industry in North America, prompting some new investment in mold testing and technology upgrades at its Shenzhen, China, manufacturing campus.
"We need to invest European and American conditions here in Shenzhen," said Joerg Wehling, TK's general manager for precision mold making.
But there are also threatening clouds on the horizon in the form of potential U.S. tariffs of 25 percent against its Chinese-made injection molds.
Those are prompting the company to huddle with U.S. customers to discuss strategies to cope with the potential trade war.
"We need to find an appropriate answer together with our customers to this trade war," Wehling said in a late April interview. "The customers do not want to pay the 25 percent. I do not want to find the 25 percent."
While the tariffs are still being debated, he said, "the change can come pretty quick and we want to be prepared."
TK makes injection molds for the packaging, medical, automotive and electronics industries at its Shenzhen facility, just across the border from Hong Kong. It's upgrading its mold testing facilities there.
"I need to refurbish the complete mold-trial room to create strict environmental conditions, such as water temperature, water pressure, air conditioning." he said. "It's mandatory so I can qualify a mold for European and U.S. users."
The upgraded, auditor-monitored facility will also feature a clean room and would guarantee intellectual property protection, Wehling said.
"I want to get the molds thoroughly approved here in Shenzhen so we don't have any issues once the mold is delivered," he said.
The company, one of China's larger export mold makers, said it's upgrading in part because the price advantage for Chinese mold makers over U.S. and European competitors is shrinking. Wehling estimates the price advantage has halved in recent years to about 20-25 percent.
"Selling only by price is quite difficult. You come under pressure again and again," he said.
TK can craft and deliver a mold in three to eight weeks, Wehling said.
"[After the tariffs,] I think the time-critical projects will still remain in China. Projects which are not so time-critical probably will be pushed back to America," he predicted.
In the fiscal year that ended Dec. 31, TK's mold business was steady. It sold HK$650 million (US$82.8 million) in molds to external customers, a 2.9 percent gain from the previous year. The mold unit's total volume, including sales to TK's own processing operations, was HK$738 million (US$94 million).
TK makes a wide variety of molds, including ultra large molds for Tier 1 automotive suppliers. Wehling oversees TK's precision multicavity molds business, primarily for the packaging, medical and electronics industries.
Europe is the biggest market for TK's molds business, generating roughly 45 percent of sales, Wehling said. Another 25-28 percent goes to the United States.
Most of these molds are shipped directly to customers abroad, rather than Chinese subsidiaries. This makes the prospect of a China-U.S. trade war especially concerning in TK's executive suite.
"We will have several discussions with our customers to find a solution before the disaster is on the table," Wehling said.
"We need to rethink our strategy because our business [would be] fully impacted by the so-called 'new rules' for exports business and import business to the U.S.," Wehling said. "We [touched] base with our customers at NPE to find an appropriate solution to grow our business there."
One solution could be to ship to a customer's operations in Mexico or Canada rather than directly to the U.S., Wehling said.
An amicable solution is key to TK's long-term American prospects, Wehling said.
"Our business is growing there," he said. "We are getting more and more orders from the U.S."
Seeking to expand its customer base abroad, TK exhibited at January's Interplastica show in Moscow for the first time, Wehling said.
TK is also in the planning stages of setting up, at the request of customers, a wholly owned American support office in the next one or two years, Wehling said.
The move is "mandatory" to maintain a strong stateside presence, he said.
The company also plans to expand its large processing operations at its sprawling Shenzhen facility, Wehling said.
Additionally, TK is seeking out merger and acquisition opportunities to increase capacity, the company said in its annual report.