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Taiwan Hand Tool Industry's Output Value Down 7.2% QoQ in Q1, 2014

2014/05/29 | By Steve Chuang

Mainly affected by seasonal factors, Taiwanese hand tool industry's output value dropped  8.2% quarter-on-quarter (QoQ) to NT$15.66 billion (US$522 million) in the first quarter of this year, a slight downturn of 0.4%from a year ago, according to the latest report by Arthur Hsu, industry analyst of Metal Industry Research & Development Centre, a government-funded market research and R&D institute.

Of the total, the report shows, NT$13.88 billion (US$462.667 million) was generated by exports, down 6.4% QoQ and almost unchanged from a year earlier. Meanwhile, the industry's imports totaled NT$970 million (US$32.33 million), dropping 9.2% QoQ or 2.4% year-on-year, while domestic market demand amounted to NT$2.8 billion (US$93.33 million). The industry's import dependence rate and export-to-output ratio stood at 34.8% and 88.4%, respectively, both trending upward from the fourth quarter of last year.

Mixed Results in 2013

Hsu indicates that the industry's performance was mixed last year, when global economic uncertainty dampened to some extent global demand for hand tools.

His report shows the industry's overall output notably surged to NT$67.67 billion (US$2.2556 billion) in the year from NT$61.51 billion (US$2.050 billion) in 2012, and exports, however, slightly slid to NT$58.26 billion (US$1.942 billion) from NT$59.01 billion (US$1.967 billion). In the meantime, imports and domestic market demand both soared to NT$4.2 billion (US$140 million) and NT$13.61 billion (US$453.67 million) from NT$4.03 billion (US$134.33 million) and NT$6.53 billion (US$217.67 million), respectively.

Although the industry's declining export was attributable partly to insiders channeling some output to meet surging domestic demand, Hsu still emphasizes having warned most of Taiwanese makers to change corporate mindset: instead of relying on short-term orders to survive increasingly competitive market, focus on business transformation, product innovation and strategic alliances throughout the industry to secure sustainable development.

Hus notes it is urgent that the industry should emphasize more on upgrades and transformation to further sharpen global competitiveness, especially when regional economic integration has become inevitable to either offer Taiwanese hand tool makers considerable business chances or overwhelm them with increasing rivalry.

Hsu opines that the three most important economic integration agreements that are most likely to greatly influence the future of Taiwan's hand tool industry are TPP (Trans-Pacific Partnership), RECP (Regional Comprehensive Economic Partnership), and ECFA (Economic Cooperation Framework Agreement).

While TPP and RECP still take Taiwan an uncertain period of time to join, ECFA, signed between Taiwan and China, has actually benefited Taiwanese hand tool suppliers in driving exports to the world's most populous country over the past few years after coming into effect in 2010, though further bilateral negotiations over closer trade cooperation under the agreement have stalled for now.

In this regard, Hsu advises Taiwanese makers, in order to ride the wave of regional economic integration, to focus on R&D and upgrade overall competitiveness, so as to better brace for intensifying competition and develop sustainably amid economic liberalization.

Outlooks in 2014

As to outlook in 2014, Hsu opines that the industry is likely to see robust growth after an uncertain 2013, when China's economic growth slowdown and EU's unsolved debt turbulence cast shadows on global economic climates, mainly due to Taiwanese suppliers' intrinsically strong competitiveness.

For instance, Hsu points out that the Taiwan-based Mighty Seven has effectively built global advantage since working out the world's smallest, lightest air ratchet wrench in 2010, and has exported the product to more than 40  countries. In addition to developing cutting-edge products worldwide, the company also focuses on promotion, hence successfully penetrating the Northeast Asian market this year.

Another globally competitive supplier is Proxene Tools Co., Ltd., who, mainly developing and manufacturing wrenches and adjustable wrenches, became ISO 50001 certified last year as the first company in Taiwan's hand tool industry following years of hard work on improving energy efficiency in the organization.

Therefore, Hsu forecasts the industry's output and exports in 2014 at NT$65.08 billion (US$2.169 billion) and NT$58 billion (US$1.933 billion), respectively, for a solid increase of 1.7% and 1.6%, which will include NT$16.75 billion and NT$14.25 billion to be attained in the second quarter. (SC)

Output of Taiwan's Hand Tool Industry

2010

2011

2012

2013

Q1, 2014

Q2, 2014
(forecast)

2014
(forecast)

Value

Value

Value

Value

Value

Q-on-Q Growth Rate

Value

Y-on-Y Growth Rate

Value

Y-on-Y Growth Rate

Output

58.30

61.80

61.51

67.67

15.66

- 8.2%

16.75

- 4.8%

68.05

1.7%

Export

53.96

59.34

59.01

58.26

13.83

- 6.4%

14.25

- 0.7%

58.00

1.6%

Import

4.57

4.76

40.3

4.20

0.97

- 9.2%

1.05

1.2%

4.25

1.4%

Domestic Market Demand

8.90

7.22

6.53

13.61

2.80

- 16.4%

3.55

17.0%

14.30

2.0%

Value Unit: NT$1 billion

Source: Metal Industries Research & Development Centre