Status of Taiwan's Plastics & Rubber Machinery Industry

Taiwan's plastics and rubber machinery industry saw production value slip 1% to NT$37.2 billion (US$1.14 billion at US$1:NT$32.5) in 2005, according to preliminary statistics compiled by the Taiwan Association of Machinery Industry (TAMI).

Exports and imports in the industry amounted to US$949.17 million and US$321 million last year, up 3% and down a whopping 49.4% respectively from the year earlier. TAMI attributes the sharp decline in imports to the sluggish demand by domestic semiconductor, information technology, and communications firms.

"The preliminary production and sales statistics show domestic plastics and rubber processors are shifting focus to the production of precision parts for the 3C (communications, consumer electronics and computer) industry, " notes Wang Cheng-ching, vice president of TAMI. "Domestic manufacturers of plastics and rubber parts, mostly small and medium in size, are installing more automation equipment to replace conventional machines."

TAMI tallies also show the ratio of exports to overall output for domestic plastics and rubber machinery industry reached 62% in 1992 and since that time the ratio has been climbing all the way to 75% and 82% in 1995 and 2005, respectively. Most domestic manufacturers in the line believe the export ratio will increase slightly for the next few years.

"As for domestic demand, imported plastics and rubber machines still have a competitive edge over domestically made ones, " says Wang. "Domestic manufacturers should ratchet up their research and development capability to increase production of high-value-added products and improve profit margins."

Time for Consolidation?

According to a TAMI study, Taiwan has around 200 manufacturers of plastics and rubber machinery, 98% of them are small and medium in size and 90% are located in Tainan, Taichung and Hsinchu. These three production centers also have the strong support of manufacturers of relevant components and parts.

As there were some newcomers stepping into this industry, some of the veteran manufacturers are worrying about harsher competition in the years to come. Many call for an industry consolidation and greater niche marketing to minimize price competition.

Plastics and rubber processing machinery is the third largest segment of Taiwan's overall machinery industry, trailing only machine tools and textile machinery. TAMI's tallies show the average annual output of domestic plastics and rubber machinery manufacturers each reached NT$190 million (US$5.84 million) last year, approximately 4.5-fold that of the NT$40 million (US$1.23 million) posted by the overall machinery industry.

According to a survey conducted by the Taipei-based China Credit Information Service Ltd., a total of 14 manufacturers of plastics and rubber machinery squeezed into the list of Taiwan's top-2, 000 manufacturers in 2005, including Victor Taichung Machinery Works Co., Yeong Chin Machinery Industries Co., Asian Plastic Machinery Co., Hwa Chin Machinery Factory Co., Chuan Lih Fa Machinery Works Co., Fu Chun Shin Machinery Manufacture Co., Jon Wai Machinery Works Co., Fong Kee Machinery Works Co., Nan Rong Mechanical Co., Asia Metal Industries Inc., Ye I Machinery Factory Co., Lien Yu Machinery Co., Taiwan Union Plastic Machinery Co., and Jung Chang Machinery Co.

In terms of production volume and value, plastic injection molding machine ranks No. 1 in domestic plastics and rubber machinery industry, followed by extrusion machinery, blow molding machinery, vacuum molding machinery, hot press, tire-making machine, and special-purpose molding machine.

According to import and export statistics compiled by the Directorate General of Customs under the Ministry of Finance, exports of Taiwan-made plastics and rubber machinery industry has been experiencing huge volatility with an average of 8% annual growth in export value over the past five years.

The customs-cleared statistics show exports of Taiwan-made plastics and rubber machinery amounted to NT$22.327 billion (US$686.98 million), NT$24.71 billion (US$760.3 million), NT$26.393 billion (US$812.09 million), NT$30.834 billion (US$948.73 million), and NT$30.448 billion (US$936.86 million), respectively in the period of 2001 up to 2005.

Plastic injection molding machinery was the largest export item among domestic plastics and rubber machinery, with export value amounting to US$415.42 million last year, or 43.8% of the industry's export total. The second place went to special-purpose machines at US$224.01 million, or 23.6% of the total. Extrusion machinery ranked third with US$66.37 million, accounting for 7%. Blow molding machine stood at the fourth place with US$54.84 million, accounting for 5.8%. The fifth place went to vacuum molding machine and hot press with US$42.05 million, or 4.4%.

Reliance on China

In respect of export destinations, Hong Kong and mainland China jointly absorbed the largest export share of domestically made plastics and rubber machinery industry, with US$398.76 million worth of the products shipped there in 2005. The figure represented a 7.9% drop from 2004, though still accounting for 42% of the export total. The second place went to Thailand with US$63.65 million, down 25.7% and accounting for 6.7%. Indonesia was the third-largest export outlet with US$44.53 million, up 39.5% and commanding 4.7%.

Other major export outlets, in descending order, were Vietnam, Malaysia, India, Japan, the U.S., Pakistan, Turkey, Brazil, and Egypt. The above-mentioned 12 nations and regions had a 77% share of the industry's total export last year.

On another front, Taiwan's imports of plastics and rubber processing machinery amounted to NT$8.94 billion (US$275.07 million), NT$7.45 billion (US$229.23 million), NT$18.104 billion (US$557.04 million), NT$20.015 billion (US$615.84 million), NT$9.69 billion (US$298.15 million) in the period of 2001 up to 2005, respectively.

In terms of import value by specific items, plastics injection molding machinery was the largest of its kind, with import value reaching US$108.09 million last year, accounting for 35.8% of the industry's total imports. The second place went to special-purpose machines with US$46.95 million, commanding 15.5%. Extrusion machinery ranked third with US$46.66 million, accounting for 15.4%. Other major import items, in descending order, were blow molding machine, vacuum molding machine and hot press, and tire-making machine.

Japan was the largest import source, selling US$166.32 million worth of plastics and rubber processing machinery to Taiwan last year, down 59.4% and accounting for 55.1% of the total imports. Germany ranked second with US$56 million, down 17% and commanding 18.5%. The third place went to Hong Kong and mainland China together with US$26.81 million, up 11% and earning an 8.9% share. Other major import sources, in descending order, were the U.S., Switzerland, Singapore, and Canada. The top three, including Japan, Germany, and Hong Kong and mainland China, together provided 82% of the import total.

TAMI's Wang says the biggest problem facing domestic plastics and rubber machinery manufacturers is the over-concentration of exports on mainland China and Southeast Asian nations with the former accounting for 42% of the total exports and the latter 20%. He calls for domestic manufacturers in this line to diversify export outlets, upgrade product quality, and explore upscale markets in the U.S. and Europe.