Charoenchai Transformer recently set up a joint venture with Swiss transformer maker Trasfor in a move to extend its knowhow, add value to its prod¬ucts and pursue the goal of expanding its overseas market.
Trasfor has a 51per cent stake in Trasfor Charoenchai, which has registered capital of Bt300 million, while Charoenchai Transformer holds the remainder.
"We have to admit researchanddevelopment in Thailand is not as strong as it is internation¬ally, and that we could not put huge sums into R&D to generate full technological knowhow in the short term. Therefore, the arrival of a foreign transformer firm that has such knowhow is the best choice," Charoenchai Transformer managing director Prasong Kittiratanaviwat said yesterday.
The joint venture will focus on producing drytype cast resin transformers. Prasong said the initial production capacity of Trasfor Charoenchai was set at 1,200 units per year, and a sec¬ond phase was planned should sales prospects warrant an expansion. The new plant will be at Sinsakhon Industrial Estate in Samut Sakhon province and con¬struction is expected to be completed by the end of next year.
"The new products will tap niche markets, especially in the marine, offshore and under¬ground system areas because they generate higher margins. It will tap the mass market in highrise buildings as well," he said.
The products of the joint venture will mainly serve the export market, he said, adding that the company would sell within Asean before expanding to other Asian countries and Europe.
Trasfor has supplied coil parts to Charoenchai Transformer for more than 15 years. It has been looking for an Asian partner with which to set up a facility outside Switzerland that will serve as a base for sales within Asia. Meanwhile, Charoenchai Transformer wants to acquire the knowhow for drytype cast resin transformers.
Charoenchai Transformer was run as a family business for 47 years, but when Prasong became head of the company two years ago he decided it should be upgraded to an international business.
The company currently produces oilimmersed transformers for use in factories, highrises and mediumsized manufacturers in the local and international markets. The export market accounts for 85 per cent of sales, with the focus on Asean and some European countries.
Transformer sales account for 70 per cent of revenue, with the remainder contributed by three trading companies. Prasong said his company wanted to maintain this sales proportion even though it had set up the joint venture.
Charoenchai Transformer this year expects sales revenue of Bt2.5 billion, with Bt1.6 billion from transformers. This would be 20 per cent higher than last year, thanks to brighter exports and stable growth in Thailand. However, when the new plant is completed, revenue should rise to Bt4 billion within five years.
He said local demand for transformers was growing in line with the construction sector and the demand for electricity. Overall Thai transformer growth averages 10 per cent annually.
Prasong added that the strengthening of the baht had, however, eaten into transformer margins by 7-8 per cent.
"If the baht continues to strengthen, getting a return of investment [for the new product line] might be postponed from the expected seven years to nine," he said.