The last 10 yrs is the golden period for China's tooling industry. I've seen a good number of 10-20 people small shops grown to enterprise with 300-1000 employee. $1 million business can be a dream number for China tool shops back in couple years ago but right now $5 million revenue can easily be reached by a 100 people tool shop doing export business.
Competitive pricing, in another phrase 'low cost' is the brick to knock the doors of US and EURO customers. For a $10,000 die you have nothing to lose, so why not give a shot? Lots of projects got screwed up in the first a few years of the int'l business but for the recent years, after experience gained from US standard tooling and gaging, China dies are getting more mature.
Lots of tooling shops stand up to be a major player to compete with global tooling companies. I'd say US, Japan and Euro still have the best tooling quality, if we can dump enough money in the projects, but China's tooling quality is good enough right now for a majority of the stamping parts today. And normally for now the China's tooling price is easily under 30-40% of the US pricings. For a $1 million package, think about how much you can save on tooling alone.
The biggest pusher for China to be a hot sourcing resort for US stampers are there's a shift of trend in major customers in US. Honda, Autoliv and other major players start directly building dies in China tool shops. They are feeling China pricing and they sometimes use these targets to release project to American companies. Lots of companies can't afford or be hesitate to outsource in China lost lots of business because of it. Up till now, no US tool makers can keep their labor cost being competitive with China suppliers, and the tooling is a labor-intensive business, so we have to face it. Some big companies start to outsource in China so they survived in the economic crisis, and start to grow right now. A lot of others can't afford to play the game so they ran out of business.
I've always had this point of view, that the production cost and the tooling cost should be viewed as a package. It's not the same rule that we played 10 years ago but now people want to buy cheaper car with better quality, there's no way our customer is gonna suck up the bill by themselves and paying high price on tooling that to give the supplier a chance to have good profit on tooling. The whole game is changing right now. And either we have to adapt it and make the most out of it, or we will stick to the old rule and running off the game. But nothing to complain, it's not our customer who makes the most out of it, it's the billions of car buyers, our family members, and ourselves.
Back to the China tooling industry. Now the best deleveloped shops are located majorly in the Great River Triangle and the Pearl River Tiangle, featuring tooling cities like Shenzhen, Dongguan, Wuxi and Kunshan. But the prices are also more than those located else where or maybe further inland. Even within the developed zones, some shops are big and mature, whose pricing is normally 20%-30% cheaper than US quotes, and some shops are midium and growing, whose pricing is normall 30-40% cheaper than US quotes, and some other shops are small but competitive, whose pricing is normally 40%-60% cheaper than the US quotes. However you have to be able to eliminate those shops with bad quality, reputation and capabilities first.
I want to make the biggest investment on those small shops but with great potential. Sometimes the best designer or sometimes the designing manager quit their jobs in the big and mature companies and start their own company. That's the opportunity we don't want to miss. Because you know it all comes down to design. What sweet about the small companies are their commitment, easy to work with, and sometimes easy to dominate. No saying we are gonna treat them badly, but it's a feeling that sometimes there's some tough project or turn around decision you have to make, you know they can help you out. Try to do some changes and out-of-plan decision to the big companies, then you will find how sweet and useful the small shops are.
And there will always be such kind of small shops in China. So even if the current one turned big enough to be less price competitive, harder to deal with, you can always find the next one start all over again. There's some pain involved, but it does good to the company in general.
Also here's a thing we just found out. China never actually charges anything on making changes. They did some form station wrong, they just pull that section out and re-make a new one. It doesn't seem to be a major cost to them. Try a US shop then you will know what I am talking about. Not until you paid them the money they want they won't do nothing, even sometimes it's their fault to screw it up.
We are aware the China's expenses for labor, land and material are all going up, but we believe in the next 5 years, China can still be a good spot to source tools and dies. And you can depend more complicate parts in China, too. However we always keep in mind, to look for the next China.
Written by Yi Wang (seanyernwang@gmail.com). Sharing and discussion welcome.
