In Good Control

Nobel Peace Prize recipient Kofi Annan once said that arguing against globalization is like arguing against the laws of gravity. His maxim proved true as the interdependence of global markets was made painfully clear in September. But even as high-growth emerging economies such as China are showing signs of slowing, some Minnesota companies are still positive that establishing manufacturing facilities there is the right move.

Control Products, Inc., a custom electronics design and manufacturing company based in Chanhassen, opened a manufacturing facility in Jiangsu, China, in 2006, complementing existing plants in Chanhassen and Le Sueur.

Founder and CEO Chris Berghoff said the move helped the company’s American customers penetrate the Asian market, in addition to lowering costs and establishing a strategic manufacturing base in China.

Launched in 1985, Control Products makes devices that can retrieve and remotely control data for food service, medical, heating and ventilation, and other industries. For example, one device can alert homeowners to a drop in temperature or water leakage.

Control Products wanted to establish its manufacturing plant during a period when many American companies were outsourcing to China. “Being a midsize company, we did explore the possibility of setting up a joint venture with a similar American business established there,” Berghoff says. “But we couldn’t find a suitable electronics company to partner with, and were concerned about controlling the quality.”

A wholly owned foreign enterprise is the investment vehicle of choice for many companies wishing to manufacture, process, or assemble in a foreign country. Berghoff says that his company chose this route because a joint venture might not allow enough control over a given project. A wholly owned foreign enterprise offers a less complicated legal structure and tighter control over intellectual property.

Optimal Manufacturing

Whereas the plant in China helps Control Products keep costs down, Berghoff says it’s not his intention to abandon manufacturing operations in America. In fact, he says the plant in China has helped the company balance its manufacturing across all three facilities. While U.S. locations deal with low- to medium-volume production, the China plant can run higher volumes that are labor intensive. Together, the facilities allow the company to quickly react to unpredictable surges in demand.

“If a customer whose product is running in our plant in China experiences a sudden surge in demand, we run more boards in our plants here and have it manufactured in Minnesota,” Berghoff says.