Tesla gave new lease of life to Memtech

The rise of the smartphone almost broke Mr Chuang Tze Mon's company, but Tesla founder Elon Musk provided its salvation.

Singapore-based Memtech International has more than doubled its market value in the past year, thanks to tie-ups with the likes of Tesla.

Memtech is a key supplier to Mr Musk's pioneering car company, making plastic components for its battery packs.

It is a far cry from just five years ago, when the seismic shift in the phone industry wrought by the advent of touchscreen devices saw Memtech suffer losses for two straight years.

Started by Mr Chuang's father in 2000, the company was making millions churning out the plastic keyboards used in mobile handsets produced by Nokia, Motorola and Ericsson.

Mr Chuang, Memtech's executive director, said in a recent interview: "That put the company immediately into a crisis and there was no way back. The easiest way out was to use the money to invest in a totally different business, but the existing equipment would become obsolete."

So far, investors like what they see. The stock is at its highest since May 2006, having surged 144 per cent in the past 12 months. The company now has a market capitalisation of about $217 million, four times the $54 million in 2012.

Mr Chuang, 42, knew he had to reinvent Memtech. Giving himself two years, he looked for ways to use his existing production lines. During a conference held by a German customer, he realised he could easily repurpose his facilities to make car parts.

He said: "We did some research, and found there was a trend of putting more plastic in the car to replace the metal parts, to make the car lighter, more fuel efficient and protect the environment... We identified a whole list of potential customers."

Today, Tesla accounts for about 3 per cent of Memtech's revenues.

So far, investors like what they see. The stock is at its highest since May 2006, having surged 144 per cent in the past 12 months. The company now has a market capitalisation of about $217 million, four times the $54 million in 2012.

Car parts account for about 47 per cent of its sales, compared with nearly none five years ago. Sales from the car industry will expand 20 per cent annually in the next two years, Mr Chuang said.

Memtech's shares rose 5.5 per cent to $1.54 in Singapore yesterday, while the benchmark gauge gained 1.55 per cent.

"There is potential upside from riding on Tesla's growth potential, and this working relationship has also opened other doors for Memtech," said Ms Ngoh Yi Sin, an analyst at CGS-CIMB Securities in Singapore.

Even with the rosy outlook for car parts, Memtech has not turned its back on consumer electronics, which still accounts for about 34 per cent of sales.

From June, Memtech - also a supplier to Apple's Beats Electronics - is expected to start multiple contracts with a major US electronics firm, Mr Chuang said, declining to name the company.

These contracts could potentially help double Memtech's consumer electronics sales in less than two years, he added.

The company's contract with Beats has also helped secure new customers such as Bose and JBL, said Ms Ngoh, who holds an "add" rating on the stock.

"We were fortunate enough to get into the supply chain of this US firm," Mr Chuang said.

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A version of this article appeared in the print edition of The Straits Times on March 07, 2018, with the headline 'Tesla gave new lease of life to Memtech'. Print Edition | Subscribe