This week, Canon announced plans to open the world’s largest inkjet factory – inVietnam. Canon explains the move to OPI+
Canon’s new ¥13 billion ($110 million) inkjet factory, which will be situated in the northern Vietnamese province of Bac Ninh, will start construction in May and start operations in February 2007. Once on line, it will have the capacity to produce around 700,000 units per month by the second half of 2008, and around 1.4 million units per month by the second half of 2010, Canon has revealed.
Canon spokesperson Richard Berger told OPI+ the Vietnamese location of the factory was an easy choice. "Reasons behind the decision to locate the new factory in Vietnam included the political stability of the country, the prospects for future development, and such advantages as tax incentives and attractive land prices."
Certainly, Vietnam has come on a long way in recent years. The government has reaffirmed its commitment to economic liberalisation by attracting competitive, export-driven industries. And in 2005, industrial production grew by a sturdy 15.2 per cent, according to the CIA.
In addition Canon, which derives around 10 per cent of total net sales from inkjet printer products, already operates two factories in Vietnam: a laser printer factory, which began operation last month also in the Bac Ninh province; and an inkjet factory in Hanoi which started operating in February 2002 (Canon also has another inkjet printer factory in Thailand).
"The location of the newly planned factory, which is positioned between the two existing factories, approximately in the middle, offers several advantages for the company," said Berger. "These include close proximity to the capital city of Hanoi, an ample work force, and a synergistic effect with the other production facilities located nearby."
Des Wong, president/CEO of consultancy Sino Strategies Group and a seasoned China strategist, agrees that Canon’s decision to set up the factory in Vietnam was a sound one. "It probably makes sense right now," he told OPI+. "Producing inkjet printers is, relatively, not very demanding and doesn’t need a complicated chain of vendors and suppliers like the production of automobiles, for example." Vietnam has a less skilled labour force than some countries, he added, but a highly-skilled labour force is not necessary for inkjet printers. And the labour costs in Vietnam are low.
But Wong added that there are disadvantages to setting up in Vietnam. Firstly, there is not a lot of demand for inkjet printers in the Vietnamese market, compared to the mammoth domestic market in next door China. "Hewlett-Packard (HP), for example, chose to set up an inkjet factory in China where there is huge demand for inkjets," said Wong. "Vietnam has a much smaller population, of which only half will actually buy inkjet printers."
Secondly, he said, if Canon wishes to tap into the Chinese market by exporting products from Vietnam, it will cost them the same duty as if they were exporting from the US or Europe.
Canon exports the inkjet products currently being produced in Vietnam and Thailand worldwide and it has said that this will also be the case when the new factory starts up.
And China is one market that Canon revealed it is targeting. "Since inkjet printers have already achieved a fairly high rate of penetration in the European, North American and Japanese markets, we anticipate growth potential in Russia and other regions in eastern Russia, and elsewhere in Asia, such as China and India," said Berger.