Swiss pioneers go East

by Terence MacNamee

Swiss companies both large and small have a world reputation for making precision products. It begins with watches but it doesn’t end there. Since the Euro crisis these manufacturers have been hit hard by the strong Swiss franc, which is a millstone around their necks as far as exports are concerned.

What do they do? They have to cut costs and sell cheaper. One thing they can do is to dump their Swiss and Western European suppliers, who cost too much, and replace them with suppliers in Eastern Europe and the Far East whose labour costs are low.

But another thing they can do is manufacture in these places. This way they can do it much cheaper, but also, especially in the Far East, they are going to be close to a large customer base that will appreciate an Asian presence.

One mid-sized Swiss company that did this was VAT Vacuum Valves. They were originally a family firm making a specialty product for a range of industries, but they have recently been bought by investors.

In the meantime, they have been globally sourcing their parts instead of relying on local suppliers. This has been helped by the fact that they already have sales operations in the Far East for quite a few years. But now they have gone further. They have built a new factory in Penang, Malaysia. It is in a government-sponsored industrial park that has just been developed. This plant is staffed by local people, and it is producing some of their valves for the Far Eastern market. It is also receiving supplies from the company’s Asian suppliers.

Nothing could be so different, you would think, as a Swiss precision company with its traditions of workmanship but also its intense local loyalties, cloning itself in a place half a world away like Malaysia. It’s the pitiless logic of the global marketplace that is driving it. Yet you have to admire the courage of these pioneers. They are part of a shift in the world economy from West to East that we are only beginning to understand.