It doesn’t all come down to “show me the money” for local medical device manufacturers.
Companies put up with bigger costs for labor, higher taxes and tougher government regulations just to keep manufacturing in Orange County’s hub of device makers.
In return, they get access to an able workforce and a number of suppliers and research and development labs.
“We haven’t bought into the notion that we could save (money) by going elsewhere,” said Said Hilal, chief executive of Rancho Santa Margarita-based Applied Medical Resources Corp.
Applied does all of its manufacturing in the county, with about 300 people on its assembly line churning out catheters, clamps, stents, guide wires and laparo-scopic devices.
Manufacturing elsewhere would put the company farther from its suppliers, and would lengthen the time it takes to make products, according to Hilal.
And that extra time, which could be the difference between three months and a year, is just as important as initial costs savings, he added.
To cut down on the payroll, Applied tries to automate as much of its production as possible. The company invests 6% to 8% of its nearly $200 million in revenue to find ways to automate, which is just as much as what it invests into research and developing products, Hilal said.
And rather than just eliminating jobs replaced by machines, it retrains employees to fill positions as technicians, engineers and graphic artists, he said.
Over the years almost 150 former assembly line workers at Applied have been retrained for new jobs.
“The workforce here is exceptionally diverse and experienced,” he said.
Applied also taps the resources of local schools such as the University of California, Irvine, and California State University, Long Beach, by consulting with professors on ways to improve its products.
It also helps give insight back to the schools to prepare graduates that could end up working for the company, he said.
Edwards Lifesciences Corp., an Irvine heart valve maker, is another device maker that sees local schools as an asset.
The company invested $5 million in The Henry Samueli School of Engineering at UC Irvine for a cardiovascular technology center that will work on creating new devices.
“The rich local biomedical environment holds promise for creating a larger pool of talent,” said Amanda Fowler, a spokeswoman for Edwards.
As a publicly traded company with a market value of $3.3 billion at recent check, shareholder value concerns always factor in when Edwards weighs out the pros and cons of making its products here, according to the company.
Though Edwards recognizes that the costs of doing business here are higher than other places, it also lists an overall higher quality of life in OC as an asset.
With a 50-year history in the county, being able to access other local partners and suppliers also has added value, according to the company.
Value for Manufacturing
For newer products, closeness to these sources is especially important for Aliso Viejo-based SenoRx Inc.
SenoRx makes breast cancer diagnosis and treatment devices and does about 75% of its manufacturing here.
The ability to easily access vendors and material providers allows SenoRx to more quickly receive input to make tweaks to newer products, according to the company.
“It’s not all about cost,” said Lloyd Malchow, president and chief executive of SenoRx.
Like many device makers in the county, its products are used for Medicare-approved procedures, which gives it a strong flow of business.
For Fullerton-based Beckman Coulter Inc., manufacturing here also holds strategic value in providing access to skilled labor, which might not easily be replaced if it relocated.
Beckman has been in the county since moving from Pasadena in 1954, and also makes products in Carlsbad, Indiana, Minnesota, Florida, Pennsylvania, Ireland, the Czech Republic and China.
But not all device makers have chosen to keep their production lines in the county.
Lake Forest-based I-Flow Corp. saves on labor costs by keeping the majority of its manufacturing less than three hours away in Mexico.
The Food and Drug Administration monitors the factory, which is manned by a workforce specially trained by I-Flow.
“We’re very proud of the workers we trained,” said Orlando Rodrigues, vice president of marketing for the company.
The labor-intensive manufacturing of its On-Q product, a device for pain relief for surgery patients, would be too expensive to do in OC, Rodrigues said.
And many of its factory employees couldn’t afford to live in OC.
But I-Flow isn’t likely to move its headquarters from the county because of the talented workforce it can tap here, Rodrigues said.
Rodrigues worked for Irvine-based Allergan Inc. in the 1980s when it moved its factory from the area to Waco, Texas because of higher costs here.
