July 2017 Sydney Morning Herald
Cochlear insists it is committed to Australian manufacturing after it unveiled a plan to spend $50 million in China developing the first offshore facility for its signature product as its local plants reach capacity. Cochlear will build the plant in the western Chinese city of Chengdu and hopes to have the first units rolling off the assembly line in four years once it has gained the necessary regulatory approvals. At full production, the plant will boost Cochlear's implant production capacity by 50 per cent. Cochlear has previously manufactured the implants only in Australia, although it has plants for other products in the United States, Sweden and Belgium it owns following acquisitions.
"We see that we could reach capacity in Australia in six, seven, eight years, so it's the right time," chief operating officer Dig Howitt said.
Mr Howitt said the company considered building the new plant in Australia but the decision to build a new facility in China should not be seen as a negative assessment of local conditions. "It is several things. That market presence is important, there will be a small cost advantage that is important to us but that local presence and learning is a bigger factor.” Mr Howitt declined to say how much the cost savings associated with the shift might be but insisted Australia was still crucial.
"We are committed to manufacturing in Australia," he said, adding it was "totally integrated with our product development”. He pointed to the company's purchase of its Lane Cove facility and an upgrade of its Brisbane plant as evidence of that commitment. "We will continue to export products from the Australian factories to China even after the Chinese factory is running," he said.
"We thought about this on a global basis and this is where our manufacturing strategy [aligns] with our China strategy.” China was already one of Cochlear's top five markets and it was expected to grow quickly as the government continued to push for the use of implants with children and as adults embraced the product in line with trends in more developed economies.
Mr Howitt said the company's thinking was also influenced by a desire to leverage access to local networks of health providers and ensure it headed off Chinese competitors. "By being here we will learn more about the market," he said. Investors lifted Cochlear's share price by 2.42 per cent to $153.57. "Cochlear has been building its presence in China for more than 20 years and this investment recognises the importance of our business in China and will support the future growth of our emerging markets business," chief executive Chris Smith said. Cochlear has the support of the local government but Mr Howitt played down suggestions of subsidies although he flagged some limited incentives such as key worker housing being made available.