In Hong Kong, one of the world’s most expensive cities, chemical firm Lanxess has opened a facility for testing car parts made with its engineering plastics. The center supports automakers and their parts suppliers throughout Asia—from Japan to India.
The choice of Hong Kong is surprising. Chemical companies generally locate their technical support centers near their customers’ operations. However, Hong Kong has no auto industry, and other manufacturers decamped long ago to mainland China, where costs are lower. Earlier this year, the real estate consulting firm Savills ranked Hong Kong as the world’s most expensive place to locate a business.
And yet, Lanxess officials argue that the location makes sense. At a media briefing last month marking the opening of the technical center, Lanxess officials noted that Hong Kong is a regional hub that’s easily accessible from almost any major city in Asia. “There is excellent logistics here,” said Thomas Babl, the firm’s head of technical marketing and engineering services for high-performance materials in Asia.
Other Lanxess officials pointed out that Hong Kong is neutral ground for fiercely competitive car manufacturers. Japanese firms would likely hesitate to ship their prototype parts for testing in, say, South Korea. “Rather than have technical centers in all the Asian countries, we chose to set up one regional one in Hong Kong,” said Christof Krogmann, Lanxess vice president for high-performance materials in Asia. The firm spent a few million dollars on the center.
Lanxess is not the only chemical maker to view Hong Kong in a favorable light. Both Dow Chemical and BASF use Hong Kong as their Asian headquarters. In June 2011, BASF stated that the city is an “ideal base to direct growth throughout the region” when it renewed its lease on several floors of prime office space in the city’s financial district. The company employs more than 700 people in Hong Kong.
Early last year, BASF relocated its global headquarters for dispersions and pigments to Hong Kong, a decision that involved moving 50 employees from Germany. But Dow and BASF don’t produce anything in Hong Kong, nor do they run labs there.
Located north of the city center in the government-subsidized Hong Kong Science & Technology Park, Lanxess’ new facility will evaluate the reliability and performance of car parts made with Lanxess engineering plastics. The materials include Durethan nylon, Pocan semicrystalline thermoplastic polyester, and Tepex composite laminate, a business that became part of Lanxess last September when it acquired Germany’s Bond-Laminates. Lanxess’ Asian plants for the plastics are in Wuxi, China, and Jhagadia, India.
The Hong Kong facility is fitted with machinery that tests how prototype car parts react to vibrations, extreme temperatures, physical pressure, exposure to chemicals, and other stresses. Scientists and engineers at the center also design new car parts and conduct computer simulations of their performance. When the facility is fully operating, it will employ about 30 people.
Before the Hong Kong center opened, Lanxess supported Asian car manufacturers out of Germany. Although the new facility is in a city with no car industry, Babl said it will put Lanxess much closer to the customers that need it.