TK Group (Holdings) Ltd., a Chinese mold maker, has focused on the North American market, not only discovering opportunities for new business development, but also seeing the great challenges posed by the threat of Sino-US trade warfare.
These opportunities include the growing demand for molds from the North American automotive industry and the promotion of some new investments in mold testing and technology upgrades at the manufacturing industry park in Shenzhen, China.
Joerg Wehling, general manager of precision mould manufacturing at Dongjiang Group, said: 'We need to invest the European and American conditions here in Shenzhen.'
However, at the same time, the dark cloud topped the potential increase of 25% of U.S. tariffs threatening China to make injection molds.
These have prompted the company to work with US customers to explore strategies for dealing with potential trade wars.
Wehling said in an interview in late April: 'We need to work with our customers to find the best answer to this trade war. Customers are not willing to pay a 25% tariff. I don't want to.'
Although the issue of tariffs is still arguing, he said: 'Change will come quite fast. We hope to be prepared for everything.'
Dongjiang Group manufactures injection molds for packaging, medical, automotive and electronics industries in its Shenzhen plant located on the Shenzhen-Hong Kong border line. The factory is upgrading its mold testing facilities.
He said: 'We need to refurbish the entire mold laboratory to create strict environmental conditions such as water temperature, water pressure and air conditioning. These conditions are essential to ensure that the qualification of molds is verified for users in Europe and the United States.'
He said that facilities upgrading and implementing audit monitoring will also have dust-free workshops and guarantee intellectual property protection.
He said: 'I need the mold to be thoroughly approved in Shenzhen. In this way, once the mold is delivered, we will not have any worries.'
The company, one of China’s leading export mold makers, said its factory upgrades were partly due to the fact that Chinese mold makers’ price advantage over European and American competitors is shrinking.
Wehling estimates that the price advantage has been reduced by half in recent years to about 20 to 25%.
He said: 'It is very difficult to open up a market with only the price. You will be under pressure again and again. 'He said that Dongjiang Group can complete the production and delivery of the mold within 3 to 8 weeks.
He predicted that: 'After tariff increases, I think that time-critical projects will still be completed in China. Those projects with time limits that are less demanding may be returned to the United States.'
In the fiscal year ending December 31, the mold business of Dongjiang Group was very stable. The company sold 6.5 billion Hong Kong dollars (about 82.8 million US dollars) of molds to external customers, an increase of 2.9% over the previous year.
The total volume of mold installations was HKD 738 million (US$ 94 million), which included sales to Dongjiang Group’s plastics processing business.
Dongjiang Group manufactures various types of molds, including manufacturing large-scale molds for Tier 1 automotive suppliers. Wehling is responsible for Dongjiang Group's precision multi-cavity molds for the packaging, medical and electronics industries.
He said that Europe is the largest market for Dongjiang's mold business, which generates about 45% of its sales. The other 25% to 28% of sales come from the US market.
Most of these molds are shipped directly to foreign customers rather than Chinese subsidiaries.
This makes the management of Dongjiang Group particularly concerned about the possible shadow of Sino-US trade warfare. Wehling said: 'We will discuss with customers many times to find a solution before the advent of difficulties.'
He said: 'We need to rethink our strategy, because our business will be completely affected by the so-called 'new rules' of the US import and export business. We are in touch with customers at NPE to find us. The right solution for US business. '
According to Wehling, one solution may be to ship the goods to customers in Mexico or Canada, rather than to the United States.
He said that the friendly solution is the key to Dongjiang Group's long-term prospects in the US market.
He said: 'Our business in the United States is growing. We are getting more and more orders from the United States.
Wehling said that in order to expand its overseas customer base, Dongjiang Group participated in the exhibition for the first time at the Interplastica in Moscow in January.
He said that at the request of the customer, Dongjiang Group is planning to set up a wholly-owned US support office that will be established within the next year or two. He said that this is an 'essential' measure to maintain a firm US market position.
He also said that the company also plans to expand its large-scale processing business at its huge Shenzhen plant.
In addition, Dongjiang Group stated in its annual report that the company has been looking for M&A opportunities to increase its production capacity.