Rechi Precision Aims to Be World’s Top-3 Compressor Maker

Expansions in China will raise annual output by over three million units

With efforts to boost production capacities in China over the past several years, Rechi Precision Co., Taiwan’s largest manufacturer of refrigeration compressors, the key motor that circulates refrigerant to expel heat to achieve refrigeration in air conditioners and refrigerators, will ship some 100 million compressors in two years, becoming a first-tier manufacturer globally.

“Rechi is already a world’s top-five compressor manufacturer but aims to be among the top-three,” says Liu Jin-hsi, chairman and general manager. Having shipped 73 million compressors by the end of 2011, Rechi is boosting capacity by over 10 million units per year.

Founded in 1989 by major shareholders of renowned home-appliance firms in Taiwan, including Sampo Corp., Tatung Co. and TERA Electronics Corp., Rechi has helped to alleviate the island’s earlier reliance on Japanese-made compressors, also playing a part to reduce Taiwan’s trade deficit with Japan.

Focused on Technology

Since its founding, Rechi has focused on technical development to roll out high-value-added compressors. With R&D team composed of specialists from the government-funded Industrial Technology Research Institute, Rechi has expertise to develop refrigeration compressors as well as related products. The company’s Guanyin plant in Taoyuan County, northern Taiwan began mass-producing 39Frame- and 48Frame-series compressors originally developed by the U.S.-based Rotorex Corp. in 1993, after acquiring core manufacturing technologies in 1991.

Rechi says production of compressors requires sophisticated technologies as well as strong financing. For instance, production of compressor pumps requires precision grinding, while over NT$1 billion (about US$39 million) in investment is needed to set up a production line capable of rolling out 1.5 million compressors per year.

The year 2001 was a watershed for Rechi as the company set its sights on becoming a world-class competitor and began deploying production in China. The strategy involved vertical integration, setting up facilities to handle pump grinding, motor manufacturing and compressor assembly to developing innovative products. The maker’s sales tripled in the five years after 2001.

Besides vertical integration, Rechi adopts division-of-labor, keeping R&D roots in Taiwan but manufacturing mainly in China, albeit still making various high-tier inverter compressors at its Guanyin plant in Taiwan. Other productions are spread across the three plants in China, including in Huizhou and Dongguan, Guangdong province in southwestern China; and Qingdao, Shandong province in northeastern China.

The company’s strategy to develop high-value-added, innovative products has paid off. In the beginning of this year, the company received substantially more orders for inverter compressors (more energy-efficient than conventional counterparts) from China’s manufacturers of air conditioners, including TCL, Midea and Haier, whose business has enabled Rechi to be one of the few compressor manufacturers in China not to cut production amid the economic slowdown.

Widen Application

To expand customer base, Rechi has raised applications of its products. For instance, the company has developed compressors for high-tier clothes driers and sold them to European brands as Electrolux of Sweden, BOSCH and Miele of Germany, claiming to be able to take a 50% share in this European segment in 2012.

Other Plans

To tap opportunities from the motor industry clustering project launched by the Kaohsiung-based China Steel Corp., Rechi will increase R&D budget by 20% yearly starting this year.

In addition, the company will increase annual output by over three million compressors by expanding capacities of its two production lines in Huizhou of Guangdong Province, and Qingdao of Shandong Province, China, whose higher capacities will boost total annual output to 15 million compressors this year to cope with China’s increasing demand.

Rechi registered NT$12.583 billion in sales in the first three quarters of 2011, with NT$752 million in after-tax earnings or NT$1.56 per share in the first three quarters of 2011, a new high over the past several years.