Franklin Vargas of Halcyon Technology (Philippines) Inc. talks about the opportunities, manufacturing challenges, and markets driving the growth of the metalworking industries in the Philippines. Article by Stephen Las Marias.
Halcyon Technology (Philippines) Inc. is a partnership company between a Filipino firm—Philippines First Diamond Metal, led by Hamilcar Azarias—and Thailand-based Halcyon Technology Public Co. Ltd. The company opened its manufacturing facility in the Philippines on January 1, 2011, but the inauguration was on November 11, 2011—that was when full operations started. Located at Laguna Technopark, Halcyon’s Philippine plant was the second manufacturing facility for Thai-based Halcyon Technology.
Initially, the company focused on hard-disk drives (HDD)—almost 98 percent of its products were delivered to the Nidec Group—Nidec Subic, Nidec Philippines, and Nidec Precision. Moving forward, there was a need to address demand from other industries, so the company expanded its customer base to automotive, aerospace, electronics, general machining, and industrial machineries. At present, about 60 percent of the company’s output goes to the HDD industries, while the rest is being distributed to other industries.
Halcyon main product is polycrystalline diamond (PCD) tools, including PCD drills, reamers, endmills, forms, and inserts. Other products include carbide cutting tools. It also offers custom-made solid carbide. The company was given a pioneer status for PCD manufacturing by the Philippine Economic Zone Authority (PEZA). Our machines range from lathe and milling machines (CNC), cylindrical grinder, surface grinder, CNC grinder, 5-axis and 6-axis machines, EDM wire-cut machine, sand blast, and bandsaw machines.
Franklin Vargas is the general manager of Halcyon Technology. He is also the president of the Metro Manila Chapter of the Metalworking Industries Association of the Philippines (MIAP). In an interview with Asia Pacific Metalworking Equipment News (APMEN), Vargas talks about the opportunities, manufacturing challenges, and markets driving the growth of the metalworking industries in the Philippines. He also discusses the initiatives and programmes of the Metro Manila Chapter of MIAP.
WHAT OPPORTUNITIES ARE YOU SEEING IN THE PHILIPPINES?
Franklin Vargas (FV): Over the past three to four years, there were a lot of companies that opened their facilities here in the country, including Shimano and Zama. So, last year was a really good year. Our main target is the manufacturers because of our customized solutions.
But this year, there was a decline; it is really a tough year. Our biggest customer, which produces spindle motor for HDD, reduced their orders. But it’s because of technology. Before, every member of the family can have a laptop, and one laptop equals one HDD. Now, there’s only one laptop for whole the family, but there are more smartphones or tablets. So, the culprit is technology. Interestingly, some of the latest smartphones have a camera that slides up and down. These are driven by precision motors—and these products are being produced by one of our customers.
Even though the culprit for the slowdown is technology, I think it is also the one that will help the industry go through this difficult year.
WHAT ARE THE BIGGEST CHALLENGES IN THE PHILIPPINES?
FV: The biggest challenge here is having the relationship with your customers. For us, it is the local companies and manufacturers. We have been battling with big, foreign brands to really prove ourselves, since we are a local company. You know, there’s always this mentality that foreign brands are better. That’s why we have to prove ourselves.
From a manufacturing perspective, the challenge is manpower. For the Filipinos, the mentality is to go overseas for better pay. Sourcing of manpower, for example for CNC machines, we can go anywhere and get a CNC machinist, because almost everybody has CNC machines. But for our products, the problem is finding a skilled person. We have to spend a considerable time for training. That’s our dilemma—coping up with the training period.
WHAT ABOUT YOUR CUSTOMERS?
FV: It is costing and delivery time. They want to have cheaper products at a faster delivery time. And that is actually an opportunity for us. That is mostly the reason why they shift from other suppliers to us, because our manufacturing is here, and we can provide them their needs immediately. Since we are the manufacturer, there are no middlemen involved, therefore, our costing can be flexible for them.
WHAT MARKETS ARE DRIVING GROWTH FOR METALWORKING INDUSTRY IN THE COUNTRY?
FV: One of the biggest industries here is HDD. Another thing is automotive, which is steadily growing. Meanwhile, one of the things we are discussing at MIAP is how to help our farmers. One really good industry here is agriculture. But the problem is that farmers do not have the support they need, the mechanization they need. That is actually one of the purposes of MIAP—to help farmers cope up with the international industry. Right now, we are using carabaos (water buffaloes) in farming. In countries such as Vietnam and Thailand, they have a lot of machines.
I think we really need to help the agriculture industry. We have a lot of plans; the only challenge is government support.
WHAT CAN YOU SAY ABOUT THE LEVEL OF MATURITY OF METALWORKING MANUFACTURING IN THE PHILIPPINES?
FV: I can say that for the small and medium enterprises (SMEs), they are still using the conventional systems and tools. I think the problem is the cost of the machine—which can range from around PhP3 million to PhP5 million (US$60,000 to US$100,000). I think that’s one of the main issues.
But we need to level up, and there are some organizations that are helping these SMEs by providing them loans. So far, some of the local companies, our customers, are now using 4-axis, 6-axis machines.
WHAT TRENDS ARE YOU SEEING THE PHILIPPINE METALWORKING INDUSTRY?
FV: The construction industry is booming, with the government’s ‘Build, Build, Build’ programme. Metal fabrication will be the one benefitting from this trend. In the manufacturing side, it will be almost the same as this year. Last year, Japan announced they will get out of China because of the US-China trade war.
Based on the feedback of our mother company, the Philippines is one of the countries being considered for manufacturing because our salaries are still lower compared to Thailand. Therefore, it is promising.
TELL US A BIT ABOUT THE METRO MANILA CHAPTER OF MIAP.
FV: MIAP aims to help members to cope up with the trends and developments in the metalworking industry. Right now, the Metro Manila Chapter has more than 70 members—composed of SMEs, traders, and manufacturers. In Manila, our aim is to help the jobbers, backyard machining. In other chapters, for instance in General Santos, Cebu, or Iloilo, their primary goal is the mechanization of the agriculture sector.
BEING THE NEWLY ELECTED PRESIDENT OF THE MANILA CHAPTER, WHAT ARE YOUR GOALS FOR THE ASSOCIATION?
FV: My goal is to strengthen the collaboration between members. That is why I am promoting more communication, to be able to better help the members with their current needs.
Through our collaboration with MIRDC (Metal Industry Research and Development Centre), we also have seminars and workshops for the improvement of the workforce. Another contribution from MIAP is to the Technical Education and Skills Development Authority (TESDA). Since TESDA is the one doing certification, for example in CNC machining and programming, we help them with the structure, how to analyse and grade the different levels of skills for CNC machinists; for instance, NC1, NC2, etc. We contribute to that structure.
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