Yacht Hardware R&D Alliance Sets Suppliers for Smoother Sailing
2009/07/30 | By Steve Chuang
Over the years the yacht builders in Taiwan have gradually evolved upward to be ODM (original design manufacturer) from OEM (original equipment manufacturer), as well as establish themselves as world-class builders-becoming one of the world's top-5 biggest yacht exporters in terms of length, while three local companies, namely Horizon Yacht Company, Ocean Alexander Yachts, and Kha Shing Enterprises Co., Ltd. are among the top-20 yacht builders globally. In 2007, Taiwanese companies built around 230 yachts worth NT$9.26 billion (US$282.66 million at US$1: NT$32.76) that were mostly exported.
Upgrading Technology
Owing their success to not only being clustered in Taiwan's southern port city of Kaohsiung, Taiwanese yacht hardware and marine equipment suppliers have also been given a push by the MIRDC (Metal Industries Research & Development Centre), the most important R&D center in southern Taiwan dedicated to production technology development for traditional industries of metals and metallic products. Since 2007, the MIRDC has set up the "Yacht Hardware R&D Alliance" (YHRDA) to help makers upgrade technologies. Despite the dedicated project being officially over in 2007, the yacht hardware and marine equipment suppliers have made considerable progress.
The YHRDA is one of many projects within the STARS (Southern Taiwan Alliance of Researchers and Scholars) Project, a program organized by the Department of Industrial Technology (DIT) of the Ministry of Economic Affairs to assist traditional manufacturing industries in southern Taiwan to improve technology. More than 2,200 companies and 2,300 scholars and experts from different industries continue to work on over 1,000 R&D projects.
Export Potential
Sue Tzyy-ker, senior engineer in the Metal Processing R&D Department of the MIRDC and the manager of the YHRDA, says that around 30 companies in Taiwan's yacht hardware industry turn out some NT$2 billion (US$61.05 million) of products annually, with over 80% generated in Kaohsiung and 60% exported. "Although small in scale, the industry features a distinct clustering in southern Taiwan with strong export potential," he says. "That's why the DIT and MIRDC selected the industry to upgrade."
According to Sue, the YHRDA is composed of seven members, starting with the largest yacht hardware supplier Aritex Products Co., Ltd. and the second-largest Man Ship Machinery & Hardware Co., Ltd. and other subcontractors, all of which joined forces with the MIRDC to develop duplex stainless steel melt casting, lightweight aluminum foam plate processing, stainless steel tube hydroforming technologies, erosion-resistant surface treatment, planarization, applications of analytical tools for developing high-holding-capacity anchors, and positive-motion technology for automatic doors on yachts.
"By applying all six key technologies, we aim to boost the production value by NT$130 million (US$3.968 million) and double the current price to NT$400 (US$12.21) per kilogram in 2009," Sue says. "Also our efforts would hopefully achieve other positive effects to bolster the whole industrial development, attracting investments estimated at NT$40 million (US$1.22 million), and attracting more workers to the industry this year."
R&D Focused
Sue and the YHRDA members have been adamant about emphasizing the importance of enhancing R&D capability. Citing the applications of analytical tools for developing high-end anchors, he says that the MIRDC had assisted the members to introduce and apply computer technologies, such as computerized 3D simulations and CAE (computer aided engineering) solutions, to develop anchors with high holding capacity, durability and safety approved by classification societies, such as Lloyd's Register of Shipping.
Sue says that the price of an anchor certified by Lloyd's could be 5-fold higher than that of an OEM counterpart. However, he adds, most Taiwanese makers lack the analytical skills to produce such high-end, reliable and safe anchors currently, mainly due to filling mostly OEM orders, which keep them too busy to spend resources on R&D.
"Few would question Taiwanese yacht hardware makers' top-notch, seasoned craftsmanship, which enables them to turn out high quality products," Sue says. "But to pursue high margins and achieve sustained business development, they have to move up to ODM, or even OBM (original brand manufacturer), because yacht owners tend to trust the familiarity of globally-famous brands when procuring accessories and replacement parts."
Downturn Impact
Another factor forcing Taiwanese makers to eagerly reduce built-to-order production is the recent global downturn that has drastically diminished worldwide demand for luxuries, such as yachts. Sue says, "So far in 2009, the industry has suffered a 70-80% decline in orders. That's why we are focused on honing R&D capability with computer technologies for development of high-end products."
According to Sue, Aritex Products has already moved to develop anchors with extra-high holding capacity and durability to be certified by a classification society. Backed by beefed-up computerized technologies, Aritex is forging ahead with the complex paperwork to apply for certification and testing, which have already cost the company more than NT$1 million (US$30,525).
Build Brand Recognition
In addition to upgrading production technology, the YHRDA has also come up with a way to build brand recognition for local yacht equipment makers: build yacht maintenance services offshore in overseas market that can help to distribute Taiwan-made products, for which the MIRDC has developed systematic management methods.
By working with a foreign yacht maintenance operator and locally-famous brands, Taiwanese makers can more easily promote replacement parts to yacht owners, according to Sue. The business model works. With help from the MIRDC, Aritex has been partnering with a U.S.-based yacht maintenance operator, setting up a maintenance center in a marina stateside that has seen smooth sailing since last year.
Helping With Logistics
"Such business model is challenging for most Taiwanese suppliers, because it requires sound logistics capability, which unfortunately is not their forte," Sue says. "Therefore, the MIRDC has developed a logistics system that allows them to effectively control inventories in offshore centers and build efficient operations. We will continue improving the system based on their feedback, so as to pave the way for others to duplicate the model to build brand recognition globally."
Sue and the YHRDA members believe that the business will work, as European and the U.S. yacht builders are beginning to outsource economical, quality yacht hardware and accessories to lower production costs. Hence, building brand recognition among foreign yacht owners by running maintenance centers will enable Taiwanese makers to outdo rivals from China, Korea and southeast Asia.
Besides, Sue stresses that Taiwanese makers must make strategic use of teamwork, which is critical considering that China's rapidly growing economy is fast creating a class of nouveau-riche, with insiders predicting that the nation will be the biggest market for luxury goods in the future. So there is an emerging, sizable market in China for luxury yachts, providing a basis for Chinese yacht builders and hardware suppliers to proliferate. "Also Taiwanese yacht hardware makers must try to move from OEM to ODM or OBM, so as to turn out middle-to-high-end products to fend off fierce price competition," he says.
6 Key Technologies Developed by Yacht Hardware R&D Alliance | |
Technology | Achievement |
Duplex Stainless Steel Melt-Casting Technology |
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Lightweight Aluminum Foam Plate Processing Technology |
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Stainless Steel Tube and Pipe Hydroforming Technology |
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Erosion-resistant Surface Treatment and Planarization |
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Applications of Analytical Tools for Development of High-holding-capacity Anchors |
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Positive-motion Technology for Automatic Doors on Yachts |
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Source: MIRDC | |