Dollar drives Rakon shift to Asia

Up to 60 of Rakon's 430 New Zealand staff are expected to lose their jobs in the shift which will take place in two to four months. Photo / Paul Estcourt

Company expects to cut $10m from annual costs by moving work to India and China.

Rakon's plan to shift New Zealand manufacturing to lower-cost plants in India and China will help address a "commoditisation" that has taken place in the smart wireless device segment of its business and the challenge posed by the strong kiwi dollar, says chief executive Brent Robinson.

The Mt Wellington-based manufacturer of frequency control products used in telecommunications infrastructure, smartphones and GPS devices said the changes were expected to deliver permanent cost reductions of $10 million a year, with 70 per cent of the benefits in place by April next year.

Up to 60 of Rakon's 430 New Zealand staff were likely to lose their jobs as a result of the shift, which will take place over the next two to four months.

Shares initially rallied by more than 12 per cent on the news, before closing up 4c at 45c last night.

The company's Chinese plant, a joint venture commissioned in the southwestern city of Chengdu last year, manufactures products primarily for the smart wireless market.

Robinson said a long-term future remained for the manufacture of more valuable temperature-compensated crystal oscillators, used in telecommunications infrastructure and other industries, in this country.

The shift would allow Rakon to place more focus on research and development in New Zealand, while facilities in France and Britain would also focus on development and the manufacture of high performance, high value products, he said.

Mark Lister, head of private wealth research at Craigs Investment Partners, said the margin improvements the company would gain through the realignment were significant, but the changes would not turn around long-term issues Rakon was facing.