Teco to invest 600 million yuan in China compressor plant

Taipei, Sept. 14, 2005 (CENS)--Teco Electric & Machinery has decided to join hands with China's Aux Group to invest 600 million yuan for a compressor plant with an annual capacity of 3 million compressors in Ninbo Zhejiang, mainland China.

The projected plant is scheduled to begin mass production next year. Teco is the last of Taiwan's major compressor makers to move its operation across the Taiwan Straits, following the steps of Sampo and Tatung, two other major compressor makers based in Taiwan.

Rechi Precision, under the auspices of Sampo, has an air-conditioner compressor plant in Huizhou, Guangdong Province, with an annual capacity of 2 million compressors. Tatung's refrigerator compressor plant in Zhongshan, Guangdong Province has also entered mass production.

Confronted with an acute price war in the home-appliances market, Teco, Sampo, and Tatung have moved their operations to the upstream sector, in an effort to cut production costs via vertical integration. Rechi Precision now ranks as the third-largest compressor maker worldwide, with a profit-making capability exceeding that of Sampo.

Lin Sheng-chuan, Teco's vice chairman, pointed out that the Aux Group is one of the five largest air-conditioner makers in China, with annual output of four million to five million units. Jointly producing compressors-parts that form the heart of air conditioners-will help Teco obtain the advantage of self-supplying key components, which could help the company ascend to the list of the top three air-conditioner manufacturers.

The new plant will be a 50-50 joint venture, with each party contributing 100 million yuan. Teco will move one production line for compressors from Taiwan to the new plant, which will have two new production lines. Afterwards, Teco's compressor plant in Taiwan, with an annual capacity of 1 million units, will only assemble compressors to fill the needs of the island's domestic market.

Rechi and China's TCL Group sent up a joint compressor plant that entered mass production last November. Its Huizhou plant, with an investment of 1 billion yuan, is turning out 2 million compressors a year, mainly for supplying the needs of China's domestic market.

Tatung's Zhongsan plant is turning out 2 million compressors now, a number which is expected to double by 2007. The output will be sold to Southeast Asia and Taiwan.