KEY POINTS:
GPS chip maker Rakon said today it would form a joint venture with the owners of Chinese based Timemaker Crystal Technology Limited (Timemaker).
Rakon will hold a 70 per cent share in the JV and will also take a 40 per cent share in Timemaker for an undisclosed sum.
"We explored a number of different options to expand Rakon's manufacturing capability in China and determined that partnering with Timemaker was the best means of establishing a successful facility," Rakon managing director Brent Robinson said.
Timemaker is the world's leading manufacturer of high specification quartz crystal blanks, which is the key component in crystal resonators.
Production of these blanks is technically demanding and labour intensive. High specification quartz crystal resonators and oscillators that form vital parts in global position systems are dependent on the quality of the crystal blank.
Rakon said it remained committed to its New Zealand manufacturing base and stressed that its move into China was not a move out of New Zealand.
Rakon will maintain the capability to manufacture quartz blanks in Auckland, but it has been outsourcing the manufacturing of high volume production for many years, Mr. Robinson said.
"Timemaker has been our preferred partner for this because of their exceptional quality and professionalism, which makes them a good match for Rakon.
"With Timemaker we have a partner on the ground in China who knows the industry and technology, which is a huge benefit"
He said Rakon's investment in Timemaker allows it to take greater control of its supply chain.
Plans for the Chinese operations were at an advanced stage and Rakon expects to begin construction in the fourth quarter of this year with production to start in late 2009.
The Chinese facility will focus on manufacturing quartz crystals resonators and Temperature Compensated Crystal Oscillators (TCXOs) for high-end and high-volume consumer applications, including the rapidly emerging GPS cellular phone market.
Timemaker would continue to focus on supply high specification quartz blanks to its global customer base.
"China is the centre for manufacturing consumer electronics and we expect significant growth there in the coming years as mobile phones, GPS and other applications become even more prolific," Mr Robinson said.
Over the next five years Rakon plans to invest between $45 million and $70m in China to meet market growth. The timing and amount of investment will depend on the speed of market growth and Rakon's success in capturing it.
Mr Robinson said Rakon had recently expanded its Auckland manufacturing plant to accommodate the growth it had been experiencing.
"The instalment of a fifth crystal line in our clean room and the commissioning of our next generation TCXO test system are significant investments in our future here," he said.
Its Auckland facility would continue to develop as a centre for innovation and development and will spearhead the manufacturing of new products and technology, he added. Rakon shares closed yesterday at $2.60. They have fallen from $5.50 in November.
- NZPA
