Taiwanese Yacht Hardware Makers Defy Downturn with Optimism
Offering optional deck hatch sizes help
2010/07/26 | By Steve ChuangYacht builders in southern Taiwan have in recent years crafted a handful of made-to-order yachts for tycoons, even including a few megayachts or ones measuring bow to stern 80 to 120 feet. Fact is the yacht-building sector in southern Taiwan is one of the celebrated industries with sea of hope, which has also driven its support sector of yacht fittings or hardware suppliers.
The effort so far has realized several key technologies, including duplex stainless steel melt casting, lightweight aluminum foam-plate processing and stainless steel tube hydroforming, erosion-resistance surface treatment and planarization, applications of analytic tools for developing high-capacity anchors, and positive-motion technology for automatic doors.
MIRDC's project manager Su Tzyy-ker said the alliance aims to raise production value of the whole industry by US$4 million, doubling the average price-per-kilogram to attract investments of US$1.23 million.
But the oceans on which the builders of yachts and hardware sail were battered by the global meltdown in late 2008, dashing hopes of further growing the sector, with the downturn all but capsizing the upstream hardware suppliers over the past year.
Trailing Yacht-builders
With scant figures to sum up Taiwan's yacht hardware sector, one can safely say that generally the health of yacht-builders is reflected in their hardware subcontractors.
Starting out in the 1960s to 1970s, Taiwan's yacht-builders saw its zenith in 1987 when output reached an all-time high of 1,755 yachts valued at US$190.792 million or an average of US$108,714 per vessel, sharply up 34.35% from US$142.01 million of a year earlier. About 81.68% of the output was exported to the U.S., with 40-to-50-footers as mainstream. That year was also bountiful for the yacht hardware sector, when more than 80 makers existed in Taiwan and all fully dependent on yacht builders.
The yacht builders who moved upscale into the megayacht segment have performed well in 2008, during which their production value climbed to US$323.53 million, growing 15.12% from US$281.05 million posted in 2007, despite building only 244 boats in the year, only 8 more than 236 seen a year earlier. The yacht fitting builders who decided to stay in Taiwan are now focusing more on export.
Choppier Seas
A ShowBoats International report released in December 2009 says only 44 80-foot and longer luxury yachts will be built in Taiwan in 2010, reaching only 5.8% of the 752 to be crafted worldwide, for a sharp decline from around 160 vessels last year. Hence Taiwan falls to seventh with total length of 4,432 feet of yacht to be built in 2010.
Nevertheless, some Taiwanese yacht hardware suppliers, especially those in the Yacht Hardware R&D Alliance, are refusing to sink to Davy Jones' locker without at least trying various counter strategies to stay afloat and prosper. Aritex and Man Ship, Taiwan's top-two yacht hardware suppliers, talk about how they are weathering the current hardship by being active rather than passive.
Aritex
Mark Tseng, general manager of Aritex, Taiwan's largest maker of yacht hardware by annual revenue, says this is the ideal time to focus on corporate core competitiveness despite the sagging market.
Incorporated in 1983 in Kaohsiung County, southern Taiwan, Aritex specializes in making and developing hardware for luxury yachts, including anchors, mooring posts, railings, bar chairs, steering wheels, fuel tanks, water tanks, door pulls etc. under its own Aritex brand, and has several subsidiaries respectively engaged in different segments.
Many globally famous yacht builders as Luerssen, Nobiskrug, HDW, Hakvoort, Feadship, Royal Huisman and CMN of Europe, and Trinity, Christensen, New Castle, Palmer Johnson and Derecktor of America are among Aritex's clients, attesting to the maker's reputation.
Being a key promoter of the YHA, Tseng says the firm made a historical move in Taiwan's yacht hardware sector, one that had been, along with the yacht building industry, neglected by Taiwan's government and weighed down by dated regulations for nearly half a century. The YHA enables members to air their needs and opinions to the government better than before, as well as tap synergy via technological cooperation.
Invest in Core Competitiveness
Admitting to suffering steep sales decline and operating losses in 2009, Tseng says, “While weighing options after the global crash, we knew Aritex would suffer net losses of around NT$500 million yearly without making changes to wait for a turnaround to 2008 level.”
So the Aritex captain invested US$3.07 million to strengthen the firm's core competitiveness, with US$1.23 million having been used in capacity expansion that is to be completed in two years, when he believes the market will turn around. Notable is that the firm, rather than laying off people, uses existing workers who are not as busy to do expansions, which also retains experienced, well-trained craftsmen and engineers.
Also Aritex has, using the remainder of the budget, invested in R&D and acquired a local auto parts company. “The acquisition seems risky to some; but we found it a bargain considering it is a company with paid-in capital of NT$100 million and annual revenue averaging millions of NT-dollars, which simply would not be available after a recovery,” says Tseng.
Automated Products
Developing automated door pulls, stern doors, pop-up TV devices and boarding ladders will also help to drive business in the next few years, says Tseng, adding that Aritex is Asia's first company capable of making such automatic yacht fittings, as well as one of a handful globally producing high-end anchors certified by Germanischer Lloyd and international ship registers.
“I am still confident of Taiwan's competitiveness in the global supply of luxury yachts; so we decided to invest in upgrading capability at this time, a move also of necessity amid the current challenges. From another viewpoint, having more downtime allows us to take a break from manufacturing to think about how to be more competitive,” says Tseng.
Man Ship
As Taiwan's first yacht hardware supplier succeeding to independently tap overseas markets, Man Ship is captained by general manager Ali Huang, who believes business opportunities are ubiquitous for the prepared despite the severe downturn.
Since its establishment in 1982 in Kaohsiung, Man Ship has been specializing in production of stainless hatches, portholes, aluminum boat windows and yacht fittings, 40% of which for the domestic market and 60% for exports. The company is especially well known as a leading supplier of deck hatches, commanding over 95% of the domestic segment, as well as an OEM (original equipment manufacturer) for globally leading yacht builders.
Huang says that his firm started out to by simply supplying deck hatches for local yacht builders, adding that over 80% of yacht hardware in Taiwan was imported.
Carving a Niche
Man Ship's success to carve a global niche is attributable to Huang's venturing into making deck hatches of galvanized iron.
Frames of deck hatches adopted by Taiwanese yacht builders were mainly made of copper, aluminum or PVC, with scant few made of Italy-imported galvanized iron, which is superior for being resistant to dust, oxidation and cracking, says Huang. However, no local makers had the know-how to process such metal, which was the motivation behind Huang's move into the line.
To exceed Italian rivals, the company developed better production flexibility to guarantee customers not only good quality, on-time delivery, but also customized specifications. “The Italians can mass produce deck hatches, yet lack of optional sizes. So we developed metal sheet processing technology, spending over one year on R&D to optimize molding with trial-and-error, to finally build a finished deck hatch that impressed customers.”
R&D to Counter Recession
Man Ship, like many SMEs in Taiwan, also invests in R&D to weather recessions.
Such R&D has achieved improved product performance: the company's newest Modern Deck Hatch, Huang says, has improved hinge mechanism to enable easy opening at any angle without manual support. And the maker offers up to diameter of 31 inches, unmatched by any rival. Also Man Ship's skilled production and seasoned craftsmen achieve bright, smooth finishes, as well as weight reductions of each deck hatch relative to competing models. Coupled with multinational patents and CE approval, these hatches will open new and plentiful opportunities for Huang's business.
Also and cooperating with the National Central University, Man Ship has developed ventilators for engine rooms in small yachts, including DC motor fans, blowers, dehumidifier and fire dampers. “We have also started developing AC ventilation solutions for higher margins than DC models and for larger luxury yachts,” says Huang.
Despite seeing plummeting sales of most Taiwanese counterparts, Huang remains optimistic, confirming corporate sales this year will recover to 70% of that in 2008, regardless of the lingering recession in the domestic yacht building industry. “Launching new products and focusing on overseas markets help us to secure sales growth and solid profit this year,” says Huang.
Huang's outlook is buoyed by the emerging luxury yacht market in China, which will create huge business potential for Taiwanese makers, whose future is also driven by efforts to urge the Taiwan government to develop a domestic yachting market.
| Yacht Hardware R&D Alliance's 6 Key Technological Achievements | |
| Subject | Achievements |
| 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 |
|
| Erosion-resistant Surface Treatment and Planarization |
|
| Applications of Analytic Tools for Development of High-holding-capacity Anchors |
|
| Positive-motion Technology for Automatic Doors on Yachts |
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