Teco shifts refrigerator production center to mainland China

Taipei, Nov. 17, 2004 (CENS)--Teco Group, Taiwan's largest manufacturer of heavy-duty electric machinery, has signed a contract with OKAS Air-condition Corp. to set up a joint-venture assembly plant of air-conditioner compressors in Ningbo of Zhejiang Province, mainland China by the end of June next year.

One of the mainland's top-three manufacturers of air conditioners, OKAS is dubbed as price killer, as it slashed selling prices three times in just 12 days in an attempt to grab a larger market share last year.

The proposed joint-venture plant will be designed to have an annual output of two million air conditioner compressors, and most of them will be mainly supplied to OKAS parent plant and counterpart producers there. Teco doesn't rule out the possibility that the prospective plant will ship some of its output back to Taiwan for sales in the domestic market.

The alliance between Teco and OKAS has raised concerns from the domestic air-conditioner compressor sector. Teco said it chose OKAS as partner just because of the mainland producer's large operating scale and its strong ambition to extend business territory.

Capitalized at RMB100 million, OKAS was touted as one of mainland's four largest air-conditioner producers, in addition to Midea Group, Haier Group, and Gree Group in 2002. Last year OKAS ranked among the mainland's top-three producers of air conditioners with sales reaching 2.5 million units. The company targets to sell 3.5 million air conditioners this year, and the figure is expected to jump to 10 million in the coming five years.

In line with the mainland investment project, Teco will keep only assembling and testing lines at its Kuanying plant in Taoyuan County of northern Taiwan while moving precision mechanical processing and electric engineering lines to mainland. The company's Kuanying plant is currently capable of rolling out one million air-conditioner compressors.

At present, Teco's Suzhou plant in Jiangsu Province concentrates on the production of small-sized motors, with an annual capacity reaching 150,000 units. To match the mainland investment project, the Suzhou plant will switch to the production of critical components and parts used in air-conditioner compressors.

Teco also plans to acquire a motor plant in northeast China to pave the way for producing special-purpose motors used by the petrochemical industry. This will help the firm speed up building a solid heavy-electric business territory in the mainland.