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success of Aeroflex group’s expansion of businesses. In manufacturers until the particular model is out of production
addition, before each business engagement, the Company which is estimated to take 5-8 years. This is because
will carefully consider its business alliances, and invest with searching for qualified auto parts manufacturers that meet
caution in small increments. Establishment of oversea requirements would need time period required for
production facilities by Aeroflex group will only be a consideration and inspection of products’ quality. As
noninclusive manufacturing base whereas semi-finished such, said operators face interruption to production.
products from production facilities in Thailand such as Mostly, screening and planning period takes 3 - 36 months.
Prefoam Tube and Sheet or compound are brought over to And for automotive companies to relocate their
continue the production of finished products. Such method manufacturing base to other countries is considered highly
of production is a defense mechanism against Aeroflex unlikely. This is because Thailand has long experience in
group’s production secret leaked to competitors or possible car manufacturing combining with continuation of
loss since mixing and production process of semi-finished developing workforce competency, and having research
products are classified as important secret of the group. center as well as effective automotive test center In
Moreover, Aeroflex considers investment in production bases combination with government’s investment promotion
via oversea subsidiaries where Aeroflex holds 100% of policy. These ensure that automotive companies will not
shares. Such production bases have incomprehensive relocate manufacturing bases to another countries.
production process with low expenses in comparison to In addition, another important reason that it is highly
production facilities in Thailand and enable Aeroflex the ability unlikely for major automotive companies to terminate
to mitigate the risks from investment. production contracts with Aeroklas in short noticeis
Aeroklas’s products have registered patents and protected
Risks related to business operation of Aeroklas group by law against any copying from competitors. This makes
Aeroklas the sole manufacturer in the country that can
Risks from termination of contract or not receiving new produce such products. Nonetheless, the Company has
contract from major trading partners care and service person for various automotive companies
Aeroklas engages in ODM production for world leading and customers on close relationship all the time.
automotive companies such as Toyota, Ford, Isuzu, Nissan Risks from dependency on automotive industry
or Mitsubishi. Such business model requires Aeroklas to Aeroklas group of companies operate their business by
have manufacturing contracts with leading automotive largely depended on automotive industry. In the future
companies, of which certain contracts are short term only event, if automotive industry slows down or faces recession
1 - 2 years and face risks from termination of contract upon as a result of overall economic situation or any other factors
expiration by customers including relocation of their as previously occurred during fiscal year ended 2012 - 2015,
production by leading automotive companies. As a result, the Company’s turnover may have negative effect and
contracts may be terminated during the term of contract result in the decline of operating result and a stage of loss.
with Aeroklas if Aeroklas considers not moving its However, Vehicle is considered an important factor for
production to nearby location. In addition to such cases, people’s life across the world. As a result, automotive
Contracts with Aeroklas may be terminated from other industry has strong growth since 2009 with average growth
reasons and result in Aeroklas’s turnover materially
deteriorated and loss. Nevertheless, Aeroklas’s customers
who are world leading automotive companies normally do
not consider changing equipments and auto parts
61Eastern Polymer Group Public Company Limited
