Rakon production set to rise significantly with new plant

Technology manufacturer Rakon is to significantly increase its production from July when a new Chinese plant is expected to open.

Craigs Investment Partner broker Chris Timms said Rakon announced yesterday there was continuing demand for its products used in smart wireless devices such as smart phones and tablet PCs.

The new Chinese plant would in particular help meet the demand from the smart wireless device market, with the demand growth expected to continue.

The plant would have capacity to produce up to 30 million crystals per month, compared with Rakon's facility in this country which, at peak production, produced 15 million frequency control products per month, he said.

By the time the facility opened, $US45 million ($NZ60 million) would have been invested in it, with plans to spend more in the following two years to meet expected growth in demand. Investors would welcome any signs of an improvement in Rakon's value, Mr Timms said.

The shares were listed in May 2006 at $1.60, hitting a peak of $5.80 in May 2007. They fell to a low of 62c in March 2009, last trading yesterday at $1.09.

"The global financial crisis came along and they were slaughtered. The demand for products they produced for things like GPS just dried up."

Much of the products Rakon produced also ended up in laser guided missiles.

Much of the demand for Rakon products was driven by economic growth in the United States. Any positive growth there went straight to Rakon's bottomline, Mr Timms said.

Rakon managing director Brent Robinson said the Chinese plant would provide significant additional capacity, at a lower cost base, for the high-volume consumer products.

"We've had significant success in recent times in increasing our market share in what is a highly competitive and growing market.

"The China facility has been planned for quite some time to deal with this and it will give us the cost and capacity base we need to be successful in profitably supplying this sector."

The increased use of smart wireless devices was putting pressure on telecommunications networks which was helping drive investment into networks and contributing to increased demand for Rakon's products across its entire business, he said.

In the past year, Rakon had increased capacity in this country and Britain, and late last year also expanded into a second factory in India to cope with increased demand in the telecom infrastructure market, where it was predicting more increases in volume in the next year.