Rakon crystallises high-tech China project

Rakon produces oscillating crystals that are used in products such as smartphones. Photo / Natalie Slade

The flag of the People's Republic of China was flying high above Rakon's headquarters in Mt Wellington yesterday, as the tech company celebrated the opening of a new Chinese plant.

The oscillating crystal manufacturer's new facility in Chengdu, capital of the southwestern Sichuan province, is a joint venture with China's Timemaker.

Rakon has invested $13.5 million for a 40 per cent stake in Timemaker, and the Chinese firm owns a 15 per cent share of the newly opened factory - Rakon Crystal Chengdu.

The new facility's six lines have the capacity to manufacture 400 million units a year, compared with Rakon's New Zealand plant, which at peak production can produce 180 million frequency control products annually, the company said.

The firm has said cheaper labour in Chengdu will provide cost savings of 30 to 40 per cent, compared to manufacturing the same products in New Zealand.

Speaking from China, Rakon managing director Brent Robinson said the factory was officially opened on Monday night.

"We've just started trial production [at the new plant] ... all in all it's been a good start to what's a great opportunity for Rakon and Timemaker."

Rakon director and Navman co-founder Sir Peter Maire, also speaking from China, said the scale of Chengdu's High-tech Industrial Development Zone - the location of the new factory - was "difficult to get your head around".

Around the corner from Rakon's new plant, contract manufacturing giant Foxconn has established a 2.8sq km factory. Foxconn makes products for Apple and was embroiled in an employee suicide scandal last year.

Maire said the Foxconn plant already employed 60,000 staff and the company was projecting to increase staffing levels to 150,000 by the end of this year.

"This is just something of a scale in New Zealand we cannot comprehend," said Maire. "Clearly [Chengdu] is becoming one of the very important hubs of China."

Chinese manufacturers have been increasingly looking to move inland towards areas such as Sichuan, away from the traditional production hubs on the country's eastern seaboard, where wage inflation has become problematic.

Robinson said Rakon's intellectual property was safe in China.

"It's very high technology," he said. "It takes a large capital investment and I think it will be very difficult for our IP to be ripped off by engineers or employees - it's not the sort of things where you can put a CD in your pocket and walk out the door."

In the year to the end of March, Rakon reported an after-tax profit of $8.5 million, compared with a loss of $5.4 million in the previous year.

Despite the improved result, the firm's share price has fallen from above $1.25 at the beginning of May, prior to the announcement of the full-year result, to as low as 96c early this month.

The shares closed up 1c at 98c last night.

Shares in the firm surged as high as $5 following its 2006 stockmarket float, but plunged to 70c as the recession hit the company in early 2009.