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Short-term Rush Orders Reverse Trend for Taiwan's Machine Tool Industry

2013/11/18 | By Ken Liu

While struggling for orders throughout the first half of this year when its export value plunged 17.4% year on year to US$1.7 billion, Taiwan's machine-tool industry has been dealing with short-term rush orders since the third quarter.

In light of such market twist, Chief Executive Officer C.C. Wang of the Taiwan Machine Tool Foundation advises local machine-tool manufacturers to be ready to cope with unpredictable market and lead time. In addition to dramatic market changes, major challenges facing Taiwan's machine-tool makers include steadily rising die-cast prices due to higher oil and electricity prices, albeit with increasingly steady supplies of key components, the relatively strong New Taiwan dollar against the Japanese yen and South Korean won, and competition favoring South Korean makers after South Korea signed Free Trade Agreement with European Union and the United States, not to mention the Comprehensive Economic Partnership Agreement (CEPA) with India.

Citing statistics from Customs Office of the Ministry of Finance, Wang notes that Taiwan's export of cutting-type machine tools contracted 22% year on year in the first half of this year, to US$1.3 billion, while export of forming-type tools increased 7.8%.

Among the island's cutting-type machines, first-half export of electrical discharge machines (EDMs) dropped 7.8% year on year, machining centers dipped 24.4%, lathes decreased 24.6%, grinding machines plunged 38.6%, and boring machines, milling machines, drilling machines and tapping machines suffered a combined 4.7% slip.

Among Taiwan's forming-type machine tools, forging presses, and punching and shearing machines registered a combined 4.5% increase year on year in the first half of the year, while other types reported a combined 19.9% growth.

Still Biggest Market

According to Wang, China, including Hong Kong, absorbed 34.8%, or US$684 million, of Taiwan's total exports of machine tools in the first half of this year, remaining the biggest export destination for Taiwan's machine tools. Nonetheless, the imports dropped 15.3% YoY.

The United States was the No.2 export destination for Taiwan's machine tools in the first half this year, taking up 11.4%, or US$197.1 million, of the Taiwan exports, down 21% YoY, also importing 7%, or US$121 million, of Taiwan's exports, with Thailand being the No.3 market.

The Taiwan exports to Turkey, Germany, Holland, England, Indonesia, South Korea, Malaysia, Vietnam, India, and Brazil slumped 22.6%, 26.9%, 13.1%, 30.5%, 19.5%, 1.8%, 24.5%,13.7%, 22.4%, and 34.6%, respectively. Russia imported 2.2% more machine tools while Japan imported 0.4% more from Taiwan.

Taiwan's imports of the machines also declined as a whole in the first six months of this year, according to Wang. The decrease rate was 0.2% year on year, to US$336 million. Among the machines imported, cutting-type machines posted a 4% decline to US$271.9 million, whereas forming-type machines registered a 19.6% surge.

In cutting-type category, EDMs and laser-processing machines, as well as drilling machines, boring machines, and milling machines were among the import growth items, increasing 22.9% and 3.3% year on year, respectively, in the first six months this year. Lathes and grinding machines decreased 3.3% and 3.5%, respectively, in the Taiwan import.

Forging presses, as well as punching and shearing machines, both of which are forming-type machines, together increased 21.1% in the Taiwan import. Other forming-type machines together surged 11.2%.

Based on the import data, Wang points out that Taiwan's traditional industries, such as precision-components and metal-processing manufactures, have steadily increased dependence on imported machine tools while its emerging high-tech industries, including semiconductor, information technology, electronics, and optoelectronics manufactures, are seeing moderately recovering imports after sharply cutting the purchases in 2012.

Japan remained the major supplier of Taiwan's machine tools in the first half, delivering Taiwan US$168.4 million of the machines, accounting for 50.1% of the total import, with the import value down 16.4% YoY. China (including Hong Kong) was the No.2 source, exporting US$38.6 million of the machines to Taiwan, an increase of 0.7% year on year. Germany was the No. 3 source, supplying US$38.5 million of the machines to Taiwan, surging 32.1% year on year.

Wang points out that Asia, European Union, and North America, all of which are major manufacturers of machine tools, feel more uncertain about the market this year than they did last year as the European debt crisis still lingers.