Manufacturing in Richmond | BCBusiness
Low electricity, water and land costs factored into China Fibre Optic's decision to open a plant in Vancouver.
China Fibre Optic looks to relocate a production line from China to Richmond, citing low land, water and electricity costs
If a North American company wants to cut manufacturing costs, conventional wisdom dictates that it should ship the work overseas to China. In a reversal, the executive director of a Chinese manufacturing firm says his company will build a new production line in Richmond to cut costs.
Raymond Xia, director of China Fiber Optic Network Systems Group, says that while labour costs in Canada are high, land, water and electricity costs are low enough to make a production line here cheaper than in China.
China Fiber Optic produces fiber optic patch cords, key hardware to fuel China’s broadband internet boom. The patch cords require ferrules, ceramic sleeves kilned out of zirconium dioxide. The company’s factory in Shijiazhuang, China, Xia says, spends 94 per cent of its operating costs on the unfired ceramic granules that make up the ferrules. The logical next step was for the company to take over production of the granules, and cut costs on inputs.
When China Fiber Optic’s directors did the math, Xia says, they found that Vancouver made more sense. “Before, we thought in Canada everything was more expensive,” he says. “But if you compare, compare, compare, in detail, it works out.”
Vancouver’s key advantage, Xia says, is land. While Vancouver industrial land might cost $1 million an acre, land in Chinese cities often costs three times as much, or more in urban centres such as Shanghai. In addition, Canadian laws will allow the company to buy land permanently, instead of only leasing it from the government as in China.
While Canadian workers are prohibitively expensive, Xia says, the Richmond production line will be mostly automated, allowing a few workers to produce enough moulded zirconium to feed the whole company. As an added bonus, he thinks Canadian intellectual property law will help to protect the formula for the company’s ceramics, and less bureaucracy will allow the company to build infrastructure more quickly.
“If the cost is lower, and the process is quicker, why not?” he says.
Xia has big plans for the Richmond operation—he talks about 200 workers and hundreds of millions of Canadian dollars in revenue—but for now it is still a slapdash project. The idea of a Richmond production line is less than a year old, and the company is now rushing to get everything in place in a few months. A day after China Fiber Optic sent out a press release about their new Canadian subsidiary, F-Pacific Optical Communications Co, the Richmond office still had not hooked up its telephone lines. The company is represented by only a handful of office staff, and even Xia is not quite sure what the “F” in “F-Pacific” stands for.
“Ferrules? Fiber optics? Whatever you want!” he says with a shrug.
F-Pacific’s first production line, which Xia wants to see operating this summer, will consist of only 20 employees in a leased space near the Knight Street Bridge, using rented Japanese machinery. If all goes according to plan, the operation will expand to 10 production lines in the next three years.