Selective Materials Strategy Is A Potent Tool for Moldmakers(1)

Reducing mold build costs with different steels and coatings may give North American shops more business from electronics OEMs.

Metal producers and coating suppliers have long promoted the use of specific materials to improve the economics of mold building. In using select grades of steel, aluminum and copper in fabrication, along with coatings that resist abrasion, corrosion and other process hazards, suppliers maintain that toolmakers can reduce production costs and enhance competitiveness, especially in a price-sensitive industry like electronics.

The argument seems logical in a market as changeable as electronics. The pace of product design in some areas makes molds obsolete in less than a year, and low-cost offshore competition dominates. There is, suppliers say, little reason to use steel with high Rockwell hardness (HRC) values for molds that may only be in use for months or for short-run production.

“There’s a tendency for the U.S. and European mold building industries to favor hard steels even when the business case for them doesn’t exist,” says Stephen DeHoff, Staff Consultant at Stress Engineering Services (Cincinnati, OH), which advises companies in moldmaking.

Most mold builders, in fact, prefer hard grades of steel for their ability to withstand the rigors of injection molding. A handful of grades—P-20, S7, H13 and 420 stainless—dominate. But while high hardness grades are durable and can be cut to tight tolerances, they also require long machining time, lengthy heat treatment procedures and can be difficult to weld. Specifying a metal that’s not as hard, but still suitable for a molding job could significantly reduce the price of a mold, suppliers maintain, especially since labor-related procedures account for 50 to 75 percent of final cost.

“We tell moldmakers to pick the steel that’s going to save them time and money—then they can start competing,” says Paul Britton, National Sales Manager for the Mold Products Division of International Mold Steel (IMS) Inc. (Florence, KY).

The goal, suppliers say, is to get tool builders to move beyond a “one-size-fits-all” approach to moldmaking and evaluate metals and coatings that reduce fabrication costs without affecting the quality and productivity of applications.

Yet toolmakers are generally reluctant to veer from the metals they know, mostly because of the costs they’ll incur if a problem develops. “Moldmakers are going to use what they know because they don’t want anything coming back to hurt them,” says Mike Close, President of Baron Quality Molds (Anaheim, CA). Unless a customer specifies another metal, Close has confidence in his track record with P-20 steel.

“Tool builders in the U.S. have a well-developed style and they stay with it,” notes DeHoff. “There’s not a hardheaded, calculating rationalization of the business needs of the product with the details of the mold specifications. Are we adding costs without adding value? Answering this would make a bunch of issues go away and marginally increase the amount of toolbuilding that stays in the U.S.”

Suppliers believe there might be reasons now for toolmakers to reconsider the materials they use in molds for electronic components. Chief among these is a greater ability to compete price-wise with offshore competitors, including those in China. While no one predicts a significant shift in business back to the U.S., there are indications that moldmakers can bid more effectively for all but the most basic molds by reining in costs. This factor, combined with the quality standards of U.S. shops, relatively short leadtimes (eight to 10 weeks), available capacity and ability to make design changes in days rather than the weeks it might take offshore, could result in business from OEMs that want to keep closer tabs on manufacturing operations.

Offshore Bargains May Fade
There also are OEMs concerned about product failures. Last summer’s recall of Chinese-made toys with lead paint highlighted the persistent quality concerns that dog manufacturing there. While there are first-rate moldmakers in China, problems exist in many shops regarding the quality of steel in use, the dimensional tolerances they can achieve and their lack of ability to build complex tools.

“The Chinese don’t do a lot of things well technically [in mold building],” says DeHoff. “They don’t use hardened steel for technical reasons as opposed to lifespan reasons, [cutting] tolerances are low, scrap rates are high and quality rejects are high. There are a lot more failures with Chinese products than have been reported. The companies this happens to have been good at keeping the problem under wraps.”

China, in fact, may become less attractive to many OEMs than it was. Wages and other costs are rising, companies are having a difficult time finding and retaining workers with technical and managerial skills, and the government recently passed or has proposed labor laws that would more than double taxes on foreign firms, encourage collective bargaining and make it difficult to terminate employees.

Wages in China—even for skilled workers—are still much less than in the West, and the country’s 2008 trade surplus is expected to increase by 45 percent over 2007 to a record $257 billion. Nevertheless, problems are developing. The yuan has risen 9.5 percent against the dollar in the past two years; labor costs in 2006 were up 16 percent and are forecast to rise 10 to13 percent this year; and the price of manufactured goods rose 1.2 percent since January, and 0.4 percent in July over June. Global Sources, a trade facilitator in Hong Kong, says 63 percent of Chinese manufacturers plan to raise export prices five to 10 percent on average by the end of the year.

Moreover, demographic trends like the one-child law are catching up with the workforce. The Chinese Academy of Sciences predicts labor shortages as soon as 2009.

Some experts believe that rising wages and business costs in China will have a ripple effect in the region. Technology Forecasters Inc. (Alameda, CA) says higher labor costs will loosen price restraints throughout Southeast Asia. As a result, Vietnam could emerge as a leader in the race for low-cost production in the region. Technology Forecasters believes, however, that U.S. OEMs may choose to move some mold production back to the Maquiladora area of Mexico if prices in China rise.

But even Maquiladora production may be temporary. Agitation by labor and human rights groups over low wages paid to workers there, coupled with a desire by OEMs to be viewed as good corporate citizens, could make a resumption of some mold building in the U.S. and Canada likely—especially if moldmakers improve the economics of their processes.

Some U.S. moldmakers already claim that by using state-of-the-art equipment and other advanced techniques they can build high quality molds for less money than in China. One firm cited by Britton, a specialist in automotive-aftermarket molds, can reportedly bring in a mold for $10,000 to $15,000 less than if produced in China. Britton, citing customer confidentiality, declines to identify the moldmaker beyond saying the company is in the Southeast.

Upgrading aspects of moldmaking to reduce fabrication costs, even to the point of selective materials specification, is beginning to gain traction among some tool builders. “To compete with a lot of the offshore places, you have to look at every aspect of the mold and cut back where you can,” says Tom Smith, General Manager of Fairway Injection Molding Systems Inc. (Walnut, CA).