Rakon, once the market darling of the NZX, is shifting
more of its operations offshore and up to 60 of its 430 New
Zealand workers are likely to lose their jobs.
Rakon chief executive Brent Robinson said the company was
realigning its global business to take advantage of its scale
manufacturing plants in India and China.
The impact of the plan was expected to deliver permanent cost
reductions and margin improvements of $1 million a year, with
70% of that result in place by April next year.
The realignment would enable the New Zealand facility to
concentrate more heavily on the company's growing research
and development and new productive development, but would
inevitably result in staff cuts in New Zealand.
One year on from the opening of its manufacturing facility in
Chengdu, China, Rakon intended to boost its capacity there,
transferring some of its crystal manufacturing capacity from
Mr Robinson said he regretted that the dynamics of the global
market meant the New Zealand team was affected by the change.
"While it is very positive that Rakon is increasing market
share in our target markets, we have to be realistic and
accept it is not possible to sustain labour-intensive
elements of manufacturing activity in New Zealand for such
globally competitive markets."
Rakon was also further expanding capacity in India to meet
demand and was realigning its activities in the United
Kingdom, France and across its global sales team, he said.
Craigs Investment Partners broker Chris Timms said the
announcement by Rakon was not dissimilar to that made by
Fisher and Paykel Appliances a few years ago when it shifted
the majority of its whiteware manufacturing offshore and
closer to its markets.
"It was the market darling for a while but fell into a hole.
It is a typical situation of disappointing the market. It was
sold down by shareholders and now it takes time to get the
market confidence back."
Much would be made about the job losses and moving offshore,
but to grow, the company had to get closer to its markets, Mr
One of the biggest issues Rakon had faced was taking on a
large amount of debt. There was now doubt in its ability to
produce high-quality crystals but the global financial crisis
had reduced sales of GPS devices, which included Rakon
With the rise in use of GPS-enabled smartphones, Rakon
crystals were again being sought, he said.
Rakon's announcement was seized upon by the Engineering,
Printing and Manufacturing Union and Labour economic
development spokesman David Cunliffe as further proof of a
manufacturing crisis in New Zealand.
EPMU manufacturing industry organiser Louisa Jones said Rakon
had repeatedly warned that the strength of the New Zealand
dollar and its extreme volatility were affecting its
"These redundancies are deeply concerning, not just for our
members but for the entire New Zealand manufacturing sector.
"If even a high-value, specialist manufacturer such as Rakon
feels it can't make a go of manufacturing in New Zealand then
the sector is in real trouble," she said.
Mr Cunliffe said Rakon was a leading company in innovation
and high-tech manufacturing.
"We need companies like Rakon to be able to innovate and grow
and employ more highly-skilled workers in New Zealand. That
isn't happening under National."
While laying off the 60 workers and moving some operations
offshore was a decision for Rakon, New Zealand needed
high-tech companies to be able to innovate, manufacture and
export from here, he said.
That required the Government to work hard as a partner that
supported manufacturing and high-value exports, Mr Cunliffe
Rakon is due to report its 2013 first-half financial results
on November 15.
Rakon: at a glance
• Listed on NZX May 2006.
• Produces and supplies a broad range of quartz crystal-based
products ranging from crystals to high-performance
temperature-controlled crystal oscillators (TCXOs).
• Manufacturing plants in New Zealand, UK, France, India and
• It listed at $1.60.
• Shares reached high of $5.60 in May 2006; low of 38c in
August this year.