Rakon on track to triple capacity with Chinese facility

Staff manufacturing components at Rakon's Auckland plant. Photo / Martin Sykes

Rakon, which manufactures crystal oscillators used in navigation systems and smart phones, is on track to triple production when its new Chinese factory comes on line in July.

The Auckland-based company will boost production capacity by 30 million crystals a month when the Chengdu facility opens, on top of the 15 million frequency control products made in New Zealand, it said in a statement.

Rakon is targeting high-end wireless products, such as smart phones and tablet devices, and is looking to gain fatter margins at the new facility in the fastest-growing part of the world.

"We've had significant success in recent times in increasing our market share in what is a highly competitive and growing market," managing director Brent Robinson said.

"The China facility has been planned for quite some time to deal with this, and it will give us the cost and capacity base we need to be successful in profitably supplying this sector."

In 2009, the components manufacturer tapped investors for $86 million to expand its Chinese manufacturing operations and boost the volume of its production while reducing the cost of doing so.

About $30 million went into the first construction stage of a new factory with joint venture partner Timemaker, with additional funds used to pay down debt.

Robinson said the increased use of wireless devices is putting pressure on telecommunications networks to meet data demand, and that's helping drive investment in transmission infrastructure and boosting demand for Rakon's products.

"Over the past 12 months we have increased capacity in New Zealand and the UK and late last year we also expanded into a second factory in India to cope with the increase in demand for our products," he said. "We are predicting further increases in volume over the next 12 months."

The global financial crisis in 2008 put the Chinese expansion on hold, forcing Rakon to reassess its investment, and shift the location of its Asian manufacturing base.

Rakon's shares rose 4 per cent to $1.05 in trading yesterday, and have dropped 17 per cent this year. The stock is rated 'outperform' in a Reuters survey of five analysts, who are picking Rakon to post full-year earnings of 5.7 cents a share in the year ending March 31, compared to a loss of 3.3 cents a year earlier.

The crystal manufacturer returned to profit with earnings of $5.6 million in the six months ended September 30.