Taiwan Printing Equipment Makers Urged to Vertically Integrate

Local operators focus on individual R&D to overlook interchange amid peers

With the rise of e-books driving printed electronics as well as sapping demand for traditional printing equipment, Taiwanese printing machine suppliers should step up going upmarket and achieving vertical integration to adapt to this transition, according to W.E. Tsai, industry analyst of Metal Industries Research & Development Centre (MIRDC), a government-funded R&D institute in Kaohsiung, southern Taiwan.

Overview

In his latest report on the current development of Taiwan's printing equipment industry, Tsai says that the industry consists of about 104 companies (based on governmental statistics compiled in 2010), mostly clustered in Taiwan's northern counties and municipalities, including Yilan, Keelung, Taipei, New Taipei City, Taoyuan and Hsinchu.

The report shows that of the total, 34 printing machine suppliers are clustered in New Taipei City, along with 17 in Taoyuan, with 36 in central Taiwan, including Taichung, Changhua and Miaoli, and 17 in southern counties and cites as Chiayi, Tainan and Kaohsiung. Just like other traditional manufacturing industries, the sector is composed of mostly small and medium enterprises with paid-in capital of less than NT$80 million, hence limiting the industry's progress to higher-end machines.

Distribution of Taiwanese Printing Machine Suppliers by Region

Region Total Company No. Percentage County & Municipality/Company No.

Northern 51 49% New Taipei City: 34 companies

Taoyuan: 17 companies

Central 36 35% Miaoli: 1 company

Taichung: 29 companies

Changhua: 6 companies

Southern 17 15% Chiayi: 7 companies

Tainan: 5 companies

Tainan: 5 companies

Source: Metal Industries Research & Development Centre

Turning Point

In terms of output value, Tsai opines that the mature industry saw its turning point for stronger growth after the global financial tsunami in 2009, with popularization of e-books having been fueled by the emergence of smartphones and other mobile Internet devices since.

He indicated that the industry's annual output remained at 4,000 units with value less than NT$10 billion before 2009, when output volume and value plummeted to NT$6.41 billion and 3,282 units, respectively, compared to NT$8.71 billion and 4,087 units a year ago. The output volume significantly rebounded to 6,773 units valued at NT$11.12 billion in 2010, and 7,369 units valued at NT$10.61 billion in 2011, mostly due to surging popularity of mobile 3C devices as e-book readers, smartphones and tablet PCs, which drive global demand for advanced printing equipment. For the past five years from 2008 through 2012, Tsai noted, the industry's compound annual growth rate in terms of output volume stood at about 2%.

The industry's imports and exports both have also shown significant growths over the years. Tsai noted that imports surged to NT$10.44 billion in 2009, NT$15.7 billion in 2010 and NT$17.48 billion in 2011 from only NT$4.77 billion in 2008. Driving the growth was the increasingly brisk demand for equipment used in midstream printing processes, which was fueled partly by Taiwan's economic recovery and partly by rising printed electronics.

Last year, Tsai indicated, imports dropped to NT$13.84 billion, 39% and 28% of which coming from Japan and China.

Meanwhile, the industry's exports totaled NT$12.49 billion in 2010, NT$14.21 billion in 2011 and NT$12.7 billion in 2012, compared to only NT$7.06 billion in 2009 and NT$8.72 billion in 2008, showing an uptrend in the past three years. China and the U.S. were the industry's top two overseas markets, which imported 35% and 11% of the total last year, according to Tsai.

Uptrend in Electronic Printing

Given that electronic printing has become a growing trend in the printing equipment industry, Tsai stated that printing equipment manufacturers in advanced countries have actively sharpened their competitiveness through vertical integrations.

In Japan, for instance, an integrated supply chain of electronic printing solutions has been formed by upstream and downstream operators, including Micro-Tech and Tokai Seiki (printing presses), Kaneka Corp. and NKK (printing ink materials) and Nippon Mektron (flexible printed circuits), spanning the area between Tokyo and Osaka to generate about US$13 billion of exports a year to make the country the biggest supplier of this kind globally.

Tsai noted that some Taiwanese printing machine suppliers have upgraded to develop and supply higher-end models to meet market trends for printed electronics, citing ATMA Champ Ent., Corp., a major screen printing machine and related peripherals supplier in Taiwan with own brand, as example that is noted for providing screen printing lines used in production of Apple's iPhone and iPad.

Although ATMA's achievement reflects Taiwanese suppliers' potential for developing top-tier printing machines, Tsai thinks that most of them are over-focused on individual R&D with insufficient interchange among peers, hence overlooking the importance of vertical integration that can help not only to attract foreign customers but also build global profile for the sector.

Therefore, Tsai suggests that in the face of printed electronics leading the development of the global printing machine industry, Taiwanese companies should take advantage of local research institutes' resources to form R&D alliances to vertically integrate production and technology with upstream and downstream operators, also seeking help with development and commercialization of key technologies and new production processes. To maximize the industry's overall competitiveness and benefits amid printed electronics boom, he stressed, structuring a sound, integral supply chain is vital.

Taiwan Printing Machine Industry's Output by Year
Year	2008	2009	2010	2011	2012
Output Value	NT$8.71 Bn.	NT$6.41 Bn.	NT$11.12 Bn.	NT$10.61 Bn.	NT$9.39 Bn.
Export Value	NT$8.72 Bn.	NT$7.06 Bn.	NT$12.49 Bn.	NT$14.21 Bn.	NT$12.70 Bn.
Import Value	NT$4.77 Bn.	NT$10.44 Bn.	NT$15.70 Bn.	NT$17.48 Bn.	NT$13.84 Bn.
Output Volume	4,084 units	3,282 units	6,773 units	7,369 units	4,325 units

Source: Metal Industries Research & Development Centre