Affa Model Train factory closing in China

Update: 8/13/2018
Greetings Fellow Model Railroaders

Comments about the Affa Model Train factory closing in China

From Jim Conway, owner and founder  Con-Cor Trains
1962 – Present

(Information posted below concerning AFFA is copyright 2018 by James Conway and may not be reused or re-transmitted  without written permission from Con-Cor International and reference to the con-cor.com website) 

There has been a lot of mis-information/ speculation about the abrupt unexpected closing of the AffaTech model train factory in China online mostly from people who have no clue what is going on (aka “Fake News”)

The closing will affect several dozen model railroad companies around the world, as Affa had maybe a dozen customers in the USA, and maybe 7-8 in Europe.

It will affect some other Model Railroad product companies in China as well, for it is not widely known but Affa had a rather large screw machine department, and was supplying many other China mfg with common parts such as wheelsets for rolling stock that met US “NMRA” or
“NEM” European standards.

On my last trip to Affa, Mr. Ku showed me his screw machine operation and bragged he had completely automated the production of wheelsets and with his high volume he was also supplying many other China mfg as he was so cheap. He ran the machines 24/7 with only two workers in the area tending the machines and making upwards of 100,000 pc a day. These included HO,N and O scale metal wheelsets and axles.

In a different area he was doing plastic wheels on metal axles.

(I can’t verify that quantity, but I could easily see it was huge numbers.)

Here is a bit of background on me, for those of you who may not know the history of Con-Cor Models and may question my comments or knowledge.

I do this not to brag, but just to authenticate the information and knowledge presented.

I started in the model train business in 1959 buying die-cast freight car kits from Clarence Menteer at Model Die Casting, painting and assembling them in the basement of our family home, and selling the RTR cars through a local Hobby Shop. (I was a high school junior at this
time.)

In 1961 I joined with some members of the local model railroad club and we opened a Hobby Shop on the NW side of Chicago named “Trains,Inc.”

In 1962 I started making wood/ metal “craftsman” style kits to compete with the likes of Main Line Models, and Ambroid which the local hobby shop could never get enough of, so I figured there most be a market there. First model was a 1918 USRA wood Boxcar kit.

In late 1962 I had made a contact in Japan through Ken Kidder who was importing some HO Brass models to buy parts for my kits, (screws, wheelsets,etc)

Through that contact, I with some of the partners in the Trains,Inc Hobby shop, including Harry Hageman who most of the Industry old timers would remember as well, (as he was a terrific Sales guy) started to import some “HO” brass models under the name of “Trains,Inc”

We were the 2nd Model Railroad company to bring American “N” Scale to the USA, delivering our N PA-1 only a few weeks after Atlas delivered their “N” E-8 models.

So ask you can see I have been around the model train business for a lot of years, as a domestic manufacturer, as well as an Importer.

I was inducted into the Model Railroad Industry Hall of Fame in 2009.

OK, back to Affa Technology Ltd. 

Here are the known facts:

On Friday morning 27 July, Mr. KK Ku the factory owner arrived at the factory early and asked all his department Managers to meet in the Conference Room.

He announced to his staff, that due to his personal ill health he would have to close the Affa factory the following week on August 3rd, and they were to tell all the workers that information
immediately. Everyone was totally shocked by the news.

Note: I was not at that meeting, and am getting this information 3rd hand, but it seems to be from a very reliable source that emailed me on Saturday 28 July.

I emailed Mr. Ku on Sat 28th July with a “get well card”, and asked if it was true that he was ill and had closed the factory.

On Monday 30 July I got a short email from KK saying, factory was closed and I should contact the factory to pick up our molds etc. No confirmation of any illness.  But Chinese people are very tight lipped about person things, so this would not be unusual.

However, further emails sent to the factory staff whom we normally dealt with on a day to day basis have gone un-replied to.

A follow up from a contact we have says a reliable party they knew drove to the Affa Factory on 4th and found it closed, and the gate to the fenced property padlocked, but no public notice posted of any sort.

On August 8th we got a one line Email from the Hong Kong office of Affa that the factory was closed on 3 Aug 2018, but no further explanation
or comments.

These are all the facts I have that can be verified.

I will post more details on our website as I can verify them.

Some Background on the factory owner Mr. KK Ku:

I personally have known Mr. Kwok-Kit Ku  (shorthand nickname “KK”) since about 1995 when I was visiting Hong Kong on one of my frequent trips (I have been to Hong Kong & China over 20 times) and while in the offices of Sanda Kan visiting with Mr. WS Ting ( Sanda Kan founder and owner at that time), he introduced me to Mr. Ku as his new general manager.

Mr. Ku worked at Sanda Kan for about 8-10 years, so he knew the model train world and people in it very well.

In 2006 I ran into Mr. Ku again at the Trainfest Show in Milwaukee  where he was soliticting business for his recently formed AffaTech company.. (I also found out at that time the 2nd season he had come to Trainfest was that his son Patrick was attending the University of
Notre Dame.

Mr. Ku had been born in Hong Kong, but attended the University of Toronto where he had gotten his Electrical Engineering Degree and had worked in the US for TRW in Texas for a number of years before accepting the job at Sanda Kan, and the chance to move back
to Hong Kong.

KK invested in a company called (in English)  “AFFA Photo Etching” about 2004-5.  Affa’s main line of business was supplying photo etched for such companies such as Tyco International (Fire and Alarm systems), Kyoceria Mita Office Equipment, Sanyo Electronics and other high-volume users, they specialized in stainless steel and Aluminum etching. He called it his “cash cow” to pay for his expanding the factory into model train production.

But even in a 2007 eMail to me, he was complaining about the Environmental issue with the DongGuan authorities.

(DongGuan) is sort of like a local County would be in the USA.

He also showed me on a visit in 2007 an all brass model of a Military tank in I am guessing about 1/32 scale. He asked me if I thought there might be a collector’s market for highly scaled military miniatures in Brass (Similar to the HO Brass loco market) I was honest with him and said I did not know, since I never sold any Military miniatures.

I also know for a while he was making a line of factory assembled highly detailed brass bridges using his AffaTech etching machines.

We stared doing business with Affatech in 2007, which proved fortunate for us, since 3 years later in 2010 it was announced that Sanda Kan was being sold to Kader Industrial (The owner of
Bachmann Trains), and then Kader announced after they took over, that they would only to continue to make trains for 3 parties (such as us, for about 18 months, and so we eventually transferred all the tooling we had at Sanda Kan/Kader to Affatech.

(For those of you who don’t know. Kader is a huge, huge toy company.. there biggest customers are the likes of Mattel and Hasboro etc.)

So their Bachmann Model Train business is a very small slice of their overall business. Even though Bachmann has a very large presence  in the English and European model train industry as well as making a large selection of HO model trains for the domestic Chinese toy market.

So we can not say at this point in time if the factory closure was due to Mr. Ku’s health, Environmental issues with the local government or financial issues of some sort.

“Comments” on Fake or mis-informed news:

Tariffs:

There is not, nor any proposed new Tariff by President Trump’s administration on Toys or Model Trains. The harmonized code for model trains is 950310. You are welcome to look it up for
yourself. There has not been an import duty on model trains for over 15 years.

Wages:

The current average wages earned by a typical factory worker today in the same area as the Affa Factory is about $328.00 a month, that is for roughly a 48 hour work week, or 196 hours a month. That works out to about $1.65 an hour, but the factory also has to pay the China government for Social Security, and a very bare bones medical plan for each worker.

BUT in almost all cases, that salary included room and board for the worker in factory owned housing.

In the case of Affa, they had a 4 story factory totally about 75,000 sf feet, and a 4 story dormitory next door housing approximately 350 workers, with a large cafeteria on the ground floor.

Wages in China have almost doubled in last 4-5 years, with the cost of your payroll almost doubling over a few years this could
have been a financial consideration, but this is my speculation only.

I also know Affa did not own the real-estate. As is the custom in China, a company owning its own real-estate is rare. Most of the Industrial property is owned by the Local Government Agencies who build the buildings and lease them long term to the various companies that occupy them. Its also possible that the Affa Lease was coming due, and the local Government wanted a huge increase in the Monthly Rental cost. As that area of China is a “hot” area for electronics now.  For a company such as Affa, it would have cost them at least a million US dollars to move to a new location.

Again this is speculation on my part as I know a former supplier, Hogan Industries was forced out of the ShenZhen area next to the Hong Kong Border when their 20 year lease was up in 2009, as the Local government wanted higher tech companies to move into that area and forced all the “toy” companies that had first moved there in the 1988-1991 period from Hong Kong when China was first opening up to move somewhere else.

Re-Shoring:

Re-Shoring is the technical term for a company to bring back foreign production back to the USA.

It is not easy to do, unless you already have a basic facility setup in the USA, and a supply chain in existence that can be expanded.

There is no way a smaller model train company could find the money to rent a suitable facility, buy all the expensive equipment needed, find and hire experienced workers, and then wait 24-36 months to get everything working smoothly before any expectation of seeing even
a tiny profit.

The above is for someone who in his heart wants to be a model train mfg.

But the flip side is the hard nose economic side. If you want to invest in all of the above, real-estate, modern equipment, hire and train skilled workers.. you should be looking at an expanding potential customer base, such as maybe accessory items for all electric
vehicles, cell phones, solar or other renewable energy, or…

So even if it “could be done”, I don’t see any “new” model train factories popping up in the USA. Unless it is a well-established company that has a large existing cash hoard to use.

The secondary problem is that in the USA, over the past 25 years most of the small “job shop” manufactures have closed their doors. What I mean is for example the local screw machine factory that employed 3-5 people and would run a few thousand of a part.

Or a local injection molding company that had maybe 10 employee’s and would run an existing molds and only run 3000-5000 parts for you.

I am sure everyone reading this message had a friend or relative that worked for such a company and lost their job when their company folded.

Today what’s left are the “large” job shops with maybe 50-100 workers and will only accept jobs with minimum orders of 50,000 – 100,000 of a part..  with the current shrinking model train market, that would be 20x the quantity needed by a model train mfg.

In the case of Con-Cor, we already make stuff here, so we have the existing real-estate, plastic injection molding machines, paint shop decorating pad print machines, and even quite a few of our molds are sitting here on the factory floor, so for us to “carry on” is not as difficult, and requires little “new” investment.

All we need to do is get back the tooling that sits at Affa.

But some of the smaller mfg. don’t even own the molds, it is my understanding that for some of them, KK paid for the molds, and just charged a higher price ex-factory for the profit to offset
the price of the molds.

If they don’t own the molds, they become part of the “Affa” Estate and the former importer of those products have no claim on them. But to be clear this is also speculation on my part.

Well enough for this installment… I will post more to our website when we have more hard facts to post.

PS: Watch for a huge announcement concerning those of you who might want to sell your surplus model trains, from a new affiliate company Con-Cor International in the coming weeks.

Update: 8/14/208

 I have been told a meeting of Affa Customers in the US was hastily organized and held during the NMRA National Train Show in Kansas City this past weekend  and almost 20 companies were represented.

  Many questions raised during that meeting, but no one could add any additional facts or information other than what I already posted above.

Update on Affa Situation 12 September 2018:

There is not much to report, some companies have been able to retrieve
some of their tooling from Affa. But communication has been sparse and
details incomplete from Affa side. Some that have picked mold sets up,
find some of the molds missing inserts, or mis-marked, and for some
important companion items such as spray decorating masks and other
accessory tooling Affa has delivered nothing.

Others have only gotten a partial return delivery, and told to wait till
maybe October to get the rest.

So looks like will be long complicated process.

Best Regards
Jim Conway
Con-Cor International,Ltd.