What is impressive about Taiwan is despite being small (with a population of 23.4 million) and the extent of its diplomatic isolation, the country has managed to build a strong economy on the back of technology and innovation. It has one of the most evolved scientific and technological infrastructures in the world. Taiwan today is the global hub of the semiconductor and electronics industry. According to the Taiwan government’s plans and forecasts, the mechanical industry has been identified as Taiwan’s 3rd largest industry after semiconductors and optoelectronics.
The country is now the world’s fourth largest exporter of machine tools and it is expected to be ranked third in the coming years. Most of the machine tools rolled out in local factories are exported to one of the 138 markets overseas. To witness the success factors of this machine tool industry, Taiwan External Trade Development Council (TAITRA) recently organised a week-long factory tour to explore the country’s world-class industry cluster, very well linked supply chain, the industry’s stable quality, fast lead time and reasonable price. The visit included eight companies, who are specialised in different product categories: SHIEH YIH Machinery (SEYI), producers of mechanical presses; Taiwan Asahi Diamond Industrial, manufacturing diamond tools; Kao Fong Machinery (KAFO), specialising in manufacturing various ranges of machining centres, gun drilling machine, moving column type; Goodway Machine Corp, specialising in manufacturing various ranges of turning centres; Manford Machinery, specialising in manufacturing wide range of machining centres, CNC lathes, tapping centre; Accutex Technologies, producing cutting edge techniques in CNC wire cut EDM; Quaser Machine Tools that include various ranges of machining centres, five-axes machining, ATC tool management system, FMC series; KAO MING Machinery, specialising in a wide range of machining centres and radial drills.
Exploring machininig dynamics
The ability of Taiwan machine tools to compete with other countries without the support of a strong car industry or huge domestic demand depends entirely on Taiwan’s flexibility and adaptability. Taiwan’s machine tool industry supply chain, from R&D design to component manufacturing, assembly, testing and marketing, forms a complete system, thus, giving the industry an advantage. The shop floors are clean and well maintained with skilled technicians and contract labourers. Most of the critical machining components are machined by Japanese machines. “The mother machines are mainly from Japan that includes Mitsubishi, Mazak, etc,” said Jason Yu, Senior Sales, Operation Director, KAFO.
The core components of the machine such as spindle, machine bed and bearings are assembled with high level of precision and accuracy. Pointing out this, Rock Liao, President, Quaser Machine Tools, said, “All core components are precisely assembled in a constant temperature controlled room, which possesses higher assembly quality and technology integration of machines than general competitors in the market.” During the whole assembly, every contacting surface is precision hand scraped to increase the flatness and improve geometric accuracy. “The factory floor is incorporated with skilled engineers for scrapping to make accuracy in the component. The hand-scraping process is labour-intensive and must be performed by skilled craftsman who are trained in the technique,” noted Irene Mao, Sales Dept, Section Manager, KAO MING Machinery Industrial. Further highlighting the challenges on this, Raoul Su, Sales Manager, Manford Machinery, noted that too much effort is needed to draw skilled people into their industry as the manufacturing industry is losing its charm.
Enabling business competence
Apart from the shopfloor factors, the companies have different product strategies that enable them to have business advantage. For example, SEYI’s product strategy includes servo technology, total solution application (Turnkey) and application of Industry 4.0. Goodway Machine has the business advantage of self-owned key component manufacturing. Talking on her company’s core technology; Rebecca Hsieh, Vice President, Sales Dept, Goodway Machine Corp, said, “Our product focus includes multi-tasking and turn-key solution for Japanese auto-parts industries. We have produced first live tooling turret in the country. We are also developing our own intelligent control system, G.LINC.” In similar way, Accutex Technologies develops its own controller for its wire cut EDM machines. Highlighting his company’s vision of to be 3rd largest wire cut EDM supplier in the world, Ray Liang, Vice President & CEO, Accutex Technologies, said, “Our quality strategy is in ICT technology, circuit test and PCBA inspection technology. We have also developed our own application, Accutex Remote Monitor, for Industry 4.0. We are spending 9.6% of our revenue in R&D, which is much higher than the average global standard.” He also averred that their competence is in research and not in sales.
Adding his company’s role on R&D, Liao of Quaser said, “We have invested in advanced research & development tools such as new generation of CAD software and finite element analysis simulation software for machine design. Our cooperation with international research partners in the development of advanced motion control, high speed spindle technology and thermal & vibration damping properties enables it to create innovative high speed & high performance machine designs.” The company’s strategy is in incorporating automation and producing mill-turn combination machines. It also offers cell automation system for skill engineer shortage. In general, the Taiwan machine tool industry is producing matured five axis machining technology with high level and more flexibility. Explaining further, Irene Mao added, “Taiwan’s greatest novelties are improving the location of change head for 5 face machines. It can increase X travel as well as the change speed for head.”
Market share – region
Interestingly, despite the political conflict, Taiwan companies are one of the largest investors in Mainland China. Many Taiwan companies have their subsidiaries in China to meet the huge local market. As for Mainland China and emerging countries in south-east Asia, central & South America, Taiwan’s exports mostly consist of machining centres & metal forming tools. Taiwan Ashai Diamond Industrial’s main market is Asian countries with 63% market share. SEYI has established XIE YI TECH MACHINERY (CHINA) subsidiary company in Dongguan, China. Speaking on the global performance of his company, Thomas Chou, Vice President, Sales & Service Division, SHIEH YIH Machinery Industry, said, “In USA, since past 2 years, the market is booming. Even some automobile factories from China & Japan have moved to USA & Mexico. We also have SEYI-America branch office in Tennessee, USA, to serve this market. In Europe, we have sold over 300 presses.” In the exports to more advanced nations in Western Europe and USA, lathes comprise a significantly high percentage, whereas metal forming tools are considerably lower. Meanwhile, machining centres have long established their position as the market mainstream. KAFO’s global market is mainly in the USA aerospace industry. Goodway Machine’s great competence factor is in Europe with around 30% market share. Manford Machinery has sold over 100 machines to the USA government.
On a highly focused note, Quaser exports 60% of products to the European market. Speaking on the quality factor, Liao said, “Our competency with the German standard is because of our machine design and its assembly processes to extend the life-time of spindle. We have our sales & service subsidiary in Switzerland to cater to Western Europe market. Our competitors are mainly from Japan, Europe and North America.” KAO MING Machinery Industrial’s main market is in USA, Germany and China with 30% market share each.
Market share – user industry
Machine tools are used by producers of many industries to make a virtually endless range of products. Recent technological innovations have given rise to many potential end-user markets, and with it, new opportunities and challenges for Taiwan’s machine tool industry. Speaking on the opportunities, Chou said, “We have firmly established the position in the global automotive supply chain with the sale of large tonnage presses in the range of 2400 ton. Leading automotive OEMs as well as many global tier 1 & tier 2 auto suppliers are now among the company’s key customers. Our products also find applications in metal hardware, home appliances, 3C components and transportation.” While highlighting the challenges, Dr Ming-Shong Lan, Chairman, Taiwan Asahi Diamond Industrial, mentioned that they want to have more market share in automotive industry because the electronic industry fluctuates often depending on demand which is not in the automobile industry. The company’s main market is in electronics industry with around 80% market share in making of TFT-LCD for Taiwan, Korea and Japan.
The Taiwan machine tool industry is facing tough competition from its Italian and Korean counterparts, especially in the mid-end market segment. In an attempt to gain greater market share, some Taiwanese producers take on niche market through intensive market study and diversified strategies. Speaking on this, Liang said, “Few years ago, our machines were used only for making parts in moulding industry. Now, parts are also made for aerospace & medical industry as well.” KAO MING Machinery Industrial’s major market distribution is in automobile and aerospace industry with nearly 50% shares each. The company is also supplying machines to defence market in China. Goodway Machine’s products find application in automotive, precision parts, 3C components and optronic.
Market presence in India
Though Taiwan’s machine tools exports to India are growing, it is still finding many challenges to increase its market presence in India due to limitations from Indian government in terms of policies & guidelines, Indian rupee value depreciation, higher import duties of machine tools & accessory components and lack of infrastructure. Speaking on the current situation in India, Jack Chen, Senior Manager, Sales Department, SHIEH YIH Machinery Industry, was optimistic and he further briefed that their automotive tier 1 to tier 3 are looking for a boost in manufacturing. “We are expecting good business orders in the upcoming IMTEX 2016, where we will be exhibiting our innovation in large tonnage presses,” he said. Dr Lan opined that India is lacking when it comes to road and rail network. “It takes a plenty of time to transfer goods from one place to other,” he emphasised.
Most of the Taiwan machines are sold to India by agents and dealers. Explaining this, Jason Yu noted, “We have our mould & car industry key customers in India like Motherson, Maruti-Suzuki, to name a few. We are selling an average of 30 machines in India every year. In recent months, we have received business orders from Honda plant, Mumbai, where we will be supplying our gear hobbing machines.” While explaining her company’s performance in India, Hsieh added, “Twenty years ago, we found our machines were selling in India. But now, we are facing tough competition from India’s local turning centre makers where they have advantage in terms of price & service.”
Some of the Taiwanese companies have partnered with Indian distributers to sell their machines. For example, Accutex partnered with Electronica group to sell their wire cut EDM machines and Manford Machinery has collaborated with S&T Engineers to sell their machining centres. “The performance in India, through the agent is about 20 machines every month,” added Raoul Su.
The way forward…
According to a trade report by the Department of Commerce, Ministry of Commerce & Industry of India, Taiwan is among India’s top five machine tool suppliers in 2014. Trade between India and Taiwan is increasing rapidly with Taiwan’s machine tools exports to India growing by 11.6% in the first two quarters of 2015 (January to June). This comes in the wake of the overall Taiwan–India bilateral trade touching US$ 2.108 billion in the first five months of 2015. Taiwanese exports to India contributed USD 1.28 billion, while imports from India touched US$ 828 million. Taiwan’s machine tools export to India grew 10% in the first five months of this year. The country has exported US$10.12 billion of machinery, including US$1.64 billion of machine tools in the first six months of this year. The production value of Taiwan’s machine tool industry is expected to increase 1.3 -1.5% by 2017.
India’s huge domestic market is a big attraction. Taiwan’s hardware & technology strengths and India’s software power and recent thrust on manufacturing can make them ideal partners. Taiwan companies are looking at manufacturing in India equally encouraging. It will help India build its manufacturing base in an area that is high-end and has enormous potential. India and Indian companies could learn a lot about building innovation and technological backbone from Taiwan.