Glove maker, Top Glove Corp Bhd announced that it will invest about RM40 million (approximately US$12.5 million) this year to upgrade its production lines as part of a strategy to mitigate the effects arising from the minimum wage to be implemented in the beginning of next year.
According to Top Glove’s Chairman Tan Sri Lim Wee Chai, the automation process could reduce manpower by as much as 50% and expects the upgrades to be completed by 80% within a year.
“The upgrade would involve more automation and it would help us reduce manpower and improve our productivity. With the lines running faster and producing better quality gloves, it would improve our bottom line too,” he said.
Lim said there will be retrenchment although the company was reducing manpower as the excess human capital would be reallocated to cater to its upcoming factory expansion plans.
The company would be adding a further 68 lines or a production capacity of 6.3 billion gloves per year, increasing its total capacity to 510 lines or 44.8 billion gloves per year by August 2013.
The automation upgrades would introduce more auto stripping and auto counting machinery into the company’s production lines.
The company is targeting a 30% global market share by December 2015, from 23% currently, with a balanced capacity mix of natural rubber and synthetic rubber gloves.
Currently, the company produces a mix of 81% natural rubber gloves and 19% synthetic rubber gloves at its 20 factories in Malaysia, China and Thailand. Meanwhile, Lim expects latex prices to drop further to about RM6 per kilo. “The latex price has dropped substantially from RM9 to RM7 currently, and this has actually helped the glove manufacturing industry,” he said. “The latex price depends a lot on supply and demand, and less rain and flood conditions in the producing countries like Thailand, Malaysia and Indonesia is favourable to the supply side, coupled with the reduced intake by China,” he said.
He said rubber prices would come down further in July and August, supported by the expected strong supply, while the strengthening US dollar also bode well for the industry.