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Medical device OEMs and their suppliers head for Costa Rica

If you’re wondering where the next low-cost country might be, look no further than Central America. Costa Rica is fast becoming a hotbed for medical device manufacturing. Helix Medical LLC, a global contract manufacturer for the medical device and healthcare industries, announced that it is investing $4 million to build a new manufacturing facility in the Coyol Free Trade Zone and Business Park in Alajuela, Costa Rica, just outside of the capital city of San Jose.

Clare Goldsberry

February 21, 2011

6 Min Read
Medical device OEMs and their suppliers head for Costa Rica

Helix Medical Costa Rica will offer contract manufacturing services, which include silicone extrusion, silicone molding, thermoplastic molding, and assembly operations. The facility will also be ISO 13485 certified with Class 7 and 8 clean rooms.

“We chose Costa Rica to be close to our customers in Latin America,” said Andy Becker, VP and general manager of Helix’s Carpenteria, CA and Costa Rica operations. “The country offers a large medical device community with a skilled workforce as well as a good reputation for security and infrastructure.”

Indeed, medical companies that have established facilities in Costa Rica include Baxter, which has been there since 1987, manufacturing IV sets and other devices, and employs 1162 people in a 176,900-ft2 facility. Boston Scientific has had operations there since 2004, and employs 1,500 people at its 104,500-ft2 plant, with a new 280,000-ft2 facility planned.   

Hospira, which came to Costa Rica in 1999, has a 500,000-ft2 facility with 2400 employees. The company recently announced a $21 million investment in a new addition to the plant in Global Park, Heredia, Costa Rica, and will add 250 employees. Moog Medical Devices, one of multinational conglomerate Moog Inc.’s many business units, invested $3.5 million in the Coyol Free Trade Zone, to build a 76,000-ft2 facility. With 250 employees in 2010, the company plans to eventually have as many as 400 by 2012.

Boston Scientific, headquartered in Natick, MA, has a 104,500-ft2 facility that it built in 2004. In June, 2009, the company announced plans for a 280,000-ft2 plant at an investment of $30 million. The company plans to close its manufacturing plant in Miami, moving those operations to Costa Rica by the end of 2011. It employs 1700, but the company expects to double that to 3400. The facility is located in ProPark in Coyol, and is a “green” facility with solar panels for power, cork flooring in the plant, recycled materials in the building’s construction, and even has its own water treatment plant. [See photo below]

Following customers
Molders have typically located facilities to supply their OEM customers at the customer’s behest. The move toward Costa Rica is no different, and many molders are catching on to this trend. MedTech Group, now part of Vention Medical, put its first facility in Costa Rica in 2004, with an expansion in 2006.

SMC Ltd., a medical device contract manufacturer headquartered in Somerset, WI, announced the construction of a 20,000-ft2 facility located in the Coyol Free Trade Zone centrally located in San Jose, Costa Rica. With over a decade of experience in Costa Rica via SMC’s purchase of Stoesser-Gordon Plastics in August of 2008, SMC’s newest medical facility will be a full-service medical device manufacturing plant with assembly, testing, packaging, and full supply-chain management on-site. “With our already long history of high-quality component manufacturing in Costa Rica, we are now able to offer our customers a state-of-the-art facility for clean room device assembly and testing,” said Bob Stoesser, VP and general manager of Western and Central America SMC Ltd.

Stoesser-Gordon had been doing business in Costa Rica for 10 years. Molding was done via a strategic alliance with a company there. “We began with the purpose of molding components to support the OEMs who had moved there,” said Stoesser in an interview. “We then moved into subassemblies, and for the last couple of years have been doing finished medical devices.” Even with the new facility, SMC plans to maintain the strategic alliance in place for components manufacturing.
Mastercraft Companies Inc., a Phoenix, AZ-based group consisting of Mastercraft Mold and custom injection molding operation Polycraft Industries, has been eyeing Costa Rica for a couple of years. Arle Rawlings, founder of Mastercraft Companies, began looking seriously at the opportunities there when he traveled to Costa Rica for the first time about a year ago.   

The primary reason Mastercraft is considering a facility there is that it serves a number of medical device OEMs in Costa Rica that want their supplier close to save on shipping. “In general, I like the opportunities that are there for us with what we have to offer,” says Rawlings. “However, there are some complexities to overcome. Suppliers for most OEMs are managed through their U.S. engineering departments. You have to work through the U.S. divisions and be approved through them until you’re there.”

Polycraft Industries specializes in components for medical instrumentation and diagnostic equipment, and medical disposables for its OEM customers. Currently, the company ships molded components to its customers’ facilities in Costa Rica, which adds not only complexity in transportation, but costs. “OEMs would like to eliminate these shipping costs,” says Rawlings. “We do primarily medium- to high-volume, highly engineered, extremely complex parts for our customers.”

Rawlings recently returned from another scouting venture to Costa Rica. “After this second trip, I feel the opportunities there are quite strong, and we have the nucleus for a good business down there,” Rawlings states. “The OEMs we work with want their suppliers there and they’re trying to persuade us to put a facility there.”   

However, as has always been the case for custom molders, chasing customers has its risks, as many discovered in the 1990s when they followed their OEM customers first to Mexico, then on to Southeast Asia and China. Some were successful, while others learned the hard way that following customers doesn’t guarantee business success.

“Managing the risk—how do you manage the risk?” Rawlings ponders. “If you’re starting up a facility in the U.S., you can borrow the money, use the collateral in your home, use other investment vehicles to fund it. In a foreign country, you don’t have that luxury. You have to have cash. Plus, the investment climate is so different today than it was a few years ago.”

Part of managing risk for molders, adds Rawlings, is trying to lock in supply contracts with OEM customers. Additionally, molders have to set up in a Free Trade Zone, along with their OEM customers, because the tax rate to ship outside the zone is quite high.

Rawlings mulls over the pros and cons, but knows that he will have to make a decision soon. “We’re evaluating the prospects of opening a facility there,” he says, with the realization that other custom molders will soon be moving into the region, also with an eye to serving the booming medical device industry there. “There would seem to be a lot of advantages to being there, but those have to be weighed against the risks.” —Clare Goldsberry

About the Author(s)

Clare Goldsberry

Until she retired in September 2021, Clare Goldsberry reported on the plastics industry for more than 30 years. In addition to the 10,000+ articles she has written, by her own estimation, she is the author of several books, including The Business of Injection Molding: How to succeed as a custom molder and Purchasing Injection Molds: A buyers guide. Goldsberry is a member of the Plastics Pioneers Association. She reflected on her long career in "Time to Say Good-Bye."

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