Omron's Shanghai plant to boost efficiency in China

Factory to introduce 21 automatic production lines by 2015, 15 of which are for the automobile industry

International industrial group Omron Corp has announced the completion of its new electronic and mechanical components plant in Shanghai, with an investment of $100 million, on Thursday, adding that it will further invest heavily in China - its second-largest overseas market.

Amid a slowdown in foreign direct investment from Japan to China and intentions by a group of Japanese companies to move to other emerging markets in the Asia-Pacific region, Omron's move is seen as a sign of recovery in investment from Japanese businesses.

Omron is a Japan-based manufacturer of control equipment, automation systems, electronic components and medical equipment.

The new plant in Shanghai will produce high-end relays and controlling components for telecommunication and automobile industries. China is Omron's second-largest overseas market, with 16 percent of its sales contributed by the emerging market.

"Our commitment to China is unchanged. China is still to be Omron's most important market," said Yoshihito Yamada, president and CEO of Omron Corp.

The plant is to introduce 21 automatic production lines by 2015, 15 of which are for the automobile industry. China is currently the world's largest vehicle market and evolving to the fourth-generation telecommunication network from 3G.

A large part of the relays and controlling components are dependant on imports. Omron's new development and manufacturing capacity in China will fill the gap, according to Koichi Tada, president of Omron's Electronic & Mechanical Components Company. The annual production capacity of the new plant is 250 million units.

Diplomatic tensions over Japan's "illegal" purchase of the Diaoyu Islands and rising labor and operation costs in China have led a number of Japanese companies to consider moving to other emerging markets, such as Vietnam and Cambodia.

According to a survey conducted by the Japan External Trade Organization last December, of the 8,000 Japanese enterprises surveyed - all with business in the Asia-Pacific region - 52.3 percent said that China would still be an important investment destination in two years, down from 66.8 percent at the end of 2011.

Yamada said he believed there are huge opportunities in the Chinese market, and Omron's expertise in technologies and solutions can help Chinese clients increase efficiency and upgrade techniques.

"The Shanghai facility is an automation plant. Speeding up automation in China is a necessary way to confront the problems created by the labor cost surge, shortage of natural resources and appreciation of renminbi as well as promoting product quality upgrading," Tada said. It also helps Omron reduce labor and operation costs.

Traditionally, multinational companies came to China because of lower manufacturing costs and rich labor resources. However, getting market access has become a key issue, with sluggish demand in other developed markets, said Li Yi'nuo, a partner of Mc Kinsey & Co China, adding that any shrewd businesses, including Japanese companies, would not give up the Chinese market.

"Compared with other Asian-Pacific markets, China still has its manufacturing advantage in terms of labor quality and rich resources of engineers, which high-tech companies can benefit much from," said Lu Feng, a professor at the China Center for Economic Research affiliated with Peking University.

Despite policy uncertainties between China and Japan, Japanese businesses cannot endure the loss of business opportunities in China, said Gao Hong, a researcher with the Institute of Japanese Studies under the Chinese Academy of Social Sciences.

liujie@chinadaily.com.cn