Manufacturing Facility Construction in China ... Lessons
LearnedMr. Mitchell Spencer
Polaris Rare Earth Materials, LLC
[Editorial Note: When Mr. Spencer spoke to our Chapter as an engineer at Magnequench (September, 1998), he concluded his presentation by saying:
Magnequench hopes to open a plant in China in the next few years to avoid the transportation costs for the neodymium, most of which is produced in China anyway.This presentation discusses what was accomplished 1998 - 2001.]
Polaris Rare Earth Materials distributes bonded rare-earth magnets and rare-earth materials. Tonight's presentation will focus on the accomplishment of building a plant in China for Magnequench Corp. (then of Anderson, Indiana).
Magnequench International is a producer of magnet powders and magnets by processes developed by General Motors. It had a state-of-the-art facility in Anderson, Indiana. NdFeB magnet materials was discovered in 1980. It has the highest flux density of all magnetic materials. It facilitates high torque in small package devices. It can be made in many shapes and magnetized in many orientations. Best of all it is inexpensive compared to Samarian Cobalt (the next best competitor).
The processing of the material is to vacuum induction melt component metals, jet cast (also known as rapid solidification) to a nearly amorphous flake, crush, anneal, fabricate and induce magnetism.
The jet cast process is patented and achieves estimated cooling rates of 25,000,000 Deg F/sec. For many reasons it was felt desirable to duplicate the capacity of the Anderson, IN facility in China. The goal was to site, build, install process equipment and workforce, and validate the production in an 18 month time frame.
Most aspects of the project stayed on schedule. A time line of key events includes:
July 1998 - Project approved
Aug. 1998 - Obtain land in Tiajin China (50 year lease - no ownership permitted)
Oct. 1998 - Cleared business license
Nov. 1998 - Broke ground
Jan. 1999 - Drove piles (soil has no bedrock so special construction required)
Apr. 1999 - Steel frame completed
Nov. 1999 - Completed construction main plant
Validating took more than a year and was the least timely of the activities.
The facility has 120000 sq ft total and is sited on 8 acres. The special requirements for the silt-based soil included 13 meter pre-cast friction beams.
The cost was high ($85/sq ft.) but it should be kept in mind that this facility was made entirely to Western standards, to endure a 7 (Richter scale) earthquake, requires extremely heavy electrical loads, and is fully air conditioned. It is said that simpler facilities can by erected in China for $15 - $20/sq ft. Bechtel was used as primary contractor for the project which was expensive, but they knew suppliers and were very efficient.
Magnequench had a major advantage on this project because of Chinese partners who had acquired about 60% of the corporation. These partners knew China and recommended a major port in Northern China (Tianjin), which has better costs than Beijing, and a good supply of engineers.
An early concern was "are Chinese ready for this technology" and the answer is YES. They are very competent in big metal processes and are hard working. The only shortcoming is lack of "hands-on" experience, and deficiencies in modern quality and process control.
Another concern was "will Magnequench be allowed to export its technology." This was difficult and required many layers of governmental review; but it was achieved.
A major concern was "How to protect proprietary processing at a Chinese facility". Five major approaches were used, although I was not around long enough after production started to be able to gauge the success.
1) Hire no one from the "magnet" industry.
2) Hire young (low net worth) educated people.
3) Offer long-term contracts with a non-compete clause.
4) All "processing" equipment was shipped from U.S. to China, so no plans were in the hands of Chinese contractors.
5) Very tight control of Process specifications and prints.
The project had several strengths:
Good Process Design (robust)
Good guidance from Chinese partners who knew China
Delegated responsibilities to on-site people
Had a very good technical focus (engineers on-site)
Very experienced contractor (Bechtel) - a "design and build contract"
Very careful hiring practices
Good training for engineers
The project also had some weaknesses:
8 acre site chosen is too small for needed expansion
run by engineers and lacked "soft" functions in planning (ie. finance, payroll, maintenance)
high facility costs
a Sr. US manager should have run plant for about 2 years with local in training
travel visas difficult to obtain for Chinese to come to US for training
The key factors to the success of this project were:
Trustworthy and competent Chinese partners
Good Planning
Good Management Support
Stay-on-schedule approach
Planned protection of intellectual property
Contactor selection and management
Attention to quiality at all steps
No compromise on safety in construction