Innovation spares Techtronic delta pain
While costs have sent other manufacturers packing, the power tool maker is thriving in its Dongguan base, thanks to a restructuring
Rising costs and the appreciation of the yuan are driving some manufacturers out of the Pearl River Delta, but Techtronic Industries is defying the trend.
Net profit for last year more than tripled from 2009 earnings to US$3.85 billion, on revenues that jumped more than 25 per cent over the same period. For the 2,000 or so foreign enterprises that have vanished from the delta manufacturing hub in Dongguan, Techtronic may be the perfect example of how innovation and technology made the difference between success and failure.
While its rivals responded to cost pressures and the appreciation of the yuan by moving to cheaper production centres and shifting their focus to the mainland's domestic market, Techtronic stuck to its business model of producing the bulk of its products in China and relying for its revenues on traditional markets like North America and Europe.
"If we were making low-cost and low value-added items, then perhaps it would make sense to lower labour costs. But our goods are highly sophisticated commodities, and when labour costs go up it affects us less than it would have on low-cost items," Techtronic executive director Stephen Pudwill said.
"I have a perfect supply chain now in China. If I moved to a place with lower labour costs, perhaps the costs to bring in components would be higher, I would need to build up a new supplier base, and the labour there may not be so stable."
