Output of Taiwan's Surface Treatment Industry Drops 13% in Q2, 2013

Taiwan's surface treatment industry, which is composed primarily of surface finishing companies and coated steel plate and sheet suppliers, finished the second quarter of this year with output value of NT$34.1 billion, down 13% year-on-year (YoY) and 10% quarter-on-quarter (QoQ) from 2012, according to the latest report by Metal Industries Research & Development Centre (MIRDC).

Since the industry's imports and exports are made up mostly of coated steel plates and sheets, the sluggish global market demand for steel and excess supplies in China leading to price drops in the Southeast Asian market and weakening coated steel prices in the U.S. were cited by MIRDC as the main reasons behind the industry's output decline in the second quarter.

The MIRDC's report shows that the industry's imports totaled NT$3.8 billion during the second quarter, with over 90% coming from Japan (51%), mainland China (30%), and South Korea (11%). The industry's exports reached NT$17.6 billion, with the U.S., the mainland, Malaysia, Thailand, and Indonesia together accounting for more than half of the total value.

Technological Advancements

The MIRDC points to a couple of new coating technologies, developed in different parts of the world, that are expected to accelerate the industry's upgrading in the near future.

One is the SLAffinity surface treatment technology, developed by Taiwan's Hung Chun Bio-S Co. in cooperation with Taipei Medical University and applied in artificial tooth roots,

According to the MIRDC, this new surface treatment technology gives tooth roots a composite surface of titanium dioxide with a porous structure formation, making the implants more hydrophilic. In the animal and clinical trials, tooth roots treated with this technology have been proven better able to enhance osseous attachment and accelerate osseous integration than most competing treatments. SLAffinity has won invention and innovation awards for the technology in Taiwan, Italy, and Russia since 2011, and it has been applied to the production of the high-quality, high-safety artificial tooth root, Ti-One 101.

The MIRDC indicates that surface treatment technologies for medical implants are a subject of increasingly intense attention to companies in the field, especially at a time when global market demand for coatings used in medical devices is projected to grow from US$5.7 billion in 2012 to around US$8 billion in 2017 for a compound annual growth rate of 6.7%.

Over the years, the MIRDC says, foreign companies have worked out coating technologies with a variety of features, including better surface resistance against corrosion by organic acid, biological compatibility, antibiotic and disinfection functions, and time release, specifically for medical implants such as cardiac pacemakers, arterial defibrillators, insulin pumps, electronic ears, and intravascular stents. Such coatings are needed to ensure higher biocompatibility and require more advanced engineering technologies.

DuroGlide®, a brand-new piston ring coating technology developed by the Federal-Mogul Corp. of the U.S., conforms to the global automotive industry's pursuit of carbon reduction and fuel efficiency.

The MIRDC notes that DuroGlide is notable for its advanced material innovation, as it is based on an amorphous high-hardness carbon-based coating that provides a physically and chemically inert barrier, improving lubricity between surfaces and preventing boundary lubrication. The main coating material is diamond-structured carbon, which features a 50% higher concentration than has been previously attained and achieves exceptional hardness and wear resistance.

Piston rings coated with DuroGlide have been proven in testing to have higher durability than piston rings coated using other technologies, and to help save up to 1.5% on fuel consumption—equivalent to a CO2 reduction of up to 3 grams per kilogram for a light vehicle. In addition to the efficiency improvement from reduced friction, DuroGlide also provides superior scuff resistance. It is ideal for coating pistons used in higher performing and fuel-efficient engines where adverse lubrication conditions are generated by smoother cylinder bore surfaces, low-viscosity oils, aggressive combustion strategies, and very high temperatures.

Surface finishing technologies aimed at creating bio-mimetic surfaces for better performance and utility are also a growing trend. A paint system developed by Germany's Fraunhofer Institute in cooperation with Airbus and the German Aerospace Center (Deutsches Zentrum für Luft- und Raumfahrt e.V.) can create a sharkskin-like surface specifically for airplanes, ships, and wind energy plants, thereby reducing wind drag.

This sharkskin paint makes an airfoil's surface aerodynamically smoother, reducing air resistance enough to cut fuel consumption by 1%. The paint has been applied to two A340-300 jet aircraft on a trial basis, and the test moved to its final stage this summer. Commercialization of the paint is scheduled to take some years to complete, after its benefits and durability are further examined and proven.

Mixed Prospects

The MIRDC believes that prospects for Taiwanese surface finishing providers and coated steel sheet and plate suppliers for the third quarter of this year are mixed.

The center indicates that although some local coated steel sheet and plate suppliers have either cut output or carried out factory maintenance in response to the oversupply situation, the revival of market demand remains uncertain given the fact that China is facing an economic growth slowdown and Southeast Asian countries, starting with Indonesia, are suffering foreign capital outflows in the expectation of the U.S. Fed's tapering of QE3.

As for the surface finishing service sector, the MIRDC thinks that the brisk growth of the car markets in China and the U.S. assures strong demand for auto parts and related finishing services, while a fast-growing market for low- to middle-end smartphones and tablet PCs in emerging countries will sustain the growth of Taiwanese suppliers and finishing service providers.

Overall, the MIRDC expects the output of Taiwan's surface treatment industry in the third quarter of this year to experience an improvement over second-quarter performance.