Finnfund

A maker of dental care equipment, Fimet has had no cause to regret establishing a production unit in China. An active market presence and efficient maintenance have helped make this Finnish company the leading foreign manufacturer in its field in China.

Production at the assembly plant in Shanghai began in 1994. Shanghai Fimet Medical Instrument Co. is a joint venture of which Fimet owns 25 percent. Finnfund holds 12.5 percent, the Finnish National Fund for Research and Development (Sitra) 12.5 percent and China’s Shanghai Dental Instrument Factory 50 percent.

The plant, located in the Pudong industrial area, employs 60 people. Apart from a Finnish managing director, all of them are Chinese.

“For the dental units we make in Shanghai, the plastic parts are imported from Finland. The metal parts are from China, which is where assembly takes place,” says Fimet’s export manager Mikko Mäkelä. He calculates that, in terms of the amount of work, half of the product is made in Finland and half in China.

Joint venture boosts company image

At the time when the joint venture was established, this was the logical solution for a company targeting China’s growing market but with headquarters in the town of Askola, Finland.

“Foreign companies entering the Chinese market generally establish a joint venture so as to cut production costs and thus be able to offer acceptable prices,” Mäkelä explains.

The decision was also greatly influenced by image considerations, he says. A joint venture is a sign to the Chinese that the foreign company has decided on a permanent presence in the local market.

Output in Shanghai is 550 dental units per year, 95 percent of them sold in China.

Mäkelä estimates that, without a joint venture, Fimet might sell 50 dental units in China. “That’s a big difference compared with our present sales figures.”

Competition in China growing tougher

Competition in the Chinese market has become tougher in the past few years, Mäkelä says. There are already nearly 20 Chinese manufacturers supplying dental care units.

Fimet’s toughest international competitors are from the United States and Japan. “Among foreign manufacturers we are number one in the Chinese market,” he says proudly.

The recipe for Fimet’s success is to customise its products to meet the needs of the local market. Chinese conditions and ergonomic requirements are among the things taken into account at the product design stage.

“Efficient maintenance is important too,” Mäkelä points out. “Expensive equipment mustn’t be left idle for days on end.”

Fewer problems than expected

Fimet already has a fairly comprehensive sales and maintenance organisation in China but intends to develop it even more in future. Despite tougher competition the Finnish company is confident that sales of its products in China will grow steadily. In a land of 1.2 billion people, the development of healthcare will be rapid as living standards rise.

“We have not regretted setting up a joint venture,” Mäkelä emphasises. “Going to China was the right action and the country has become our most important market area after Germany.”

Practical business operations in China have actually caused fewer problems than were expected, he says.

“All our contracts with the Chinese have been honoured. The country has a good business culture.”

The financing of the project is another source of satisfaction. “Finance from Finnfund was a significant element in our overall decision to go to China. As a small company we could not otherwise have set up production facilities in Shanghai.

“Our financiers have been flexible yet dependable in their financing agreements. The joint venture has performed well so additional funding has not been needed.”

Finnfund has also been pleased with the arrangements. “Shanghai Fimet has been a profitable investment,” says Matti Kerppola of Finnfund.

“The project company has been successful in production technology transfer to Shanghai and thereby in maintaining output quality there.”

For more information please contact Mr Matti Kerppola tel. +358 9 3484 3334, email firstname.lastname@finnfund.fi