Projecting growth-particularly in injection molding-ina region as volatile as Asia is risky at best. The dramatic arrivalof Asia's financial crisis and the equally dramatic and generallyunanticipated recovery shows that often within months the region'seconomies can change.

However, the fundamentals will not change. While you can anticipateconsiderable volatility on a month-to-month, quarter-to-quarter,and year-to-year basis, overall you are in a market where growthis almost unavoidable.
Continued population growth, increased demand for health care,and steady improvements in living standards will create conditionsideal for growth. Growth in injection molding across Asia willbe driven by both increases in consumer spending as well as growingregional and global trade.

The growth in output at existing and future injection moldingplants across Asia has several direct effects on the businessof U.S.-based molders.

Exports of plastic parts or goods containing numerous injectionmolded components from Asia to the United States in the next 12months will stay at current levels or even dip below them. Butin the long term Asia will be the single greatest competitor forboth low-cost and-this is the major change-numerous high-value-addedplastics parts. The formal announcement by Xerox in November tosource almost $400 million in plastic parts from China each yearis just the tip of this particular iceberg.

The old perception of Asia as principally a supplier of low-costand low-quality plastics parts will have to change. As countriessuch as Thailand, Malaysia, Singapore, and the Philippines seedomestic auto-parts-making factories grow, such suppliers willconstitute more of a direct competition to molders currently supplyingDetroit. U.S. molders will need to seek business opportunitiesin establishing their own molding plants abroad.

Growth Prospects

The table opposite shows growth projections for next year aswell as for the next five years. Overall, injection molding inthe region will enjoy growth at rates almost twice as fast asthose seen in the U.S.

Where can you find most of this growth? Look at automotiveparts, electric parts and appliances, electronics, and healthcare items as the top performers for the next five years and evenbeyond.

In the last quarters of 1999, countries such as Malaysia, Thailand,Singapore, the Philippines, and even Vietnam reported new carsale increases of 20 percent/month in some cases. Overall, inthe next five years, car and light truck sales in Asian countries(excepting South Korea, Japan, and Australia) will triple.

New car assembly plants in that region-to be built by giantssuch as Toyota and General Motors, DaimlerChrysler or Honda-willfoster very rapid growth of parts-making industries. Note thatplans for new capacity of almost two million cars/year were shelvedduring the financial crisis. This is changing now; look for newplants
to be announced in 2000. General Motors has already announcedplans to start manufacturing 40,000 cars/year by the middle of2000. Also in Thailand, Auto Alliance-a Ford and Mazda joint venture-willhave doubled capacity by the end of 1999 to 100,000 units/year.As a result, automotive molding in the region will show growthrates well in excess of 12 percent.

Consumer spending is not limited to transportation. The WorldHealth Organization projects annual health care spending increasesin the region (except for Japan and Australia) of more than 14percent/year for the next seven years. Right now medical devices-everythingfrom medical machinery to blood testing kits-are a major exportitem for U.S. firms.

This is about to change. We know of several major U.S. medicaldevice makers looking at plant locations in Asia. The same appliesto consumer applications such as small and large appliances andall types of electronics.

Where is the Evidence?

Many will ask, where is the evidence? Here is a summary ofsome of the facts behind these projections.
Four major suppliers of Japanese injection molding equipment saythat shipments to Asia will grow at rates well above 8 percent/yearfor the next five years. Machine tool sales-a good indicator offuture manufacturing growth-rose 22.6 percent from Japan to EastAsia in the first nine months of 1999.

Buoyed by the economic recoveries of its Asian trading partners,Taiwan's overall exports of plastic parts are up 12.9 percentthis year through October, aided by rising demand from Japan,South Korea, and Southeast Asia. Note, for instance, that shipmentsto Japan alone jumped more than 22 percent for plastic parts.
This past August the Thai manufacturing production index posteda 15 percent year-on-year rise in August, its most robust growthsince the indicator started showing positive growth early thisyear, and against a 13.7 percent year-on-year rise in July.

Higher imports (in September 1999 imports rose 10.4 percentover September 1998), higher consumer spending, and numerous hintsthat Japan may be on its way to a sustained recovery have emerged.Japan's growing imports of consumer goods are benefiting moldersin Asia and, in some cases, in the U.S. and Canada. There, highershipments of medical devices and car components have helped somemolders grow exports to Japan by about 4 percent this year comparedto the first half of 1998.

Surprises To Come?

Some element of uncertainty-in particular for the first halfof 2000-comes from the still unknown impact of Y2K problems andthe recent doubling of oil prices.

Inventory buildup in preparation for Y2K may depress growtharound the globe as manufacturers use up stocks in the first partof the year. In the United States, Japan, and Europe, governmentshave registered significant inventory increases. Y2K is seen asthe primary reason as companies order supplies "just in case"as opposed to "just in time."

While inventories could slow growth early in 2000, other firms,particularly in electronics, anticipate accelerated growth. Computerassemblers anticipate a major jump in orders as companies aroundthe globe suddenly are forced to replace computers and other electronicsthat failed. We will not know this is truly the case for severalmonths.

The dramatic jump in oil prices may have two effects that impactgrowth. In Europe and North America, heating bills this wintermay almost double compared to last winter. One result is reducedconsumer spending. Asian manufacturers, forced to pay more forenergy, may find themselves in turn raising prices for all goods;and that increase may somewhat depress demand. Again, by how muchwill not be known for some time. But molders should anticipatethis now.