Fair Friend Chairman Targets to Lead Global Machine Tool Sector

By KEN LIU

"I look to make Fair Friend the world's No.1 machine-tool manufacturer to be a proud example in Taiwan," says Jimmy Chu, chairman of the Fair Friend Ent. Group, Taiwan's biggest machine-tool conglomerate by revenue, who plans to generate consolidated revenue exceeding US$8.3 billion by 2020 and fulfill the said goal by increasing global investments and form a holding company to go public in Taiwan.

Chu notes that while Taiwan remains globally No.5 as a machine-tool producer and No.4 as an exporter, the island is under threat from South Korea, whose machine-tool makers are aggressively selling globally, hence believing Taiwan's machine-tool industry needs a mega-maker to lead its peers.

Chu, regarded the top acquisition strategist of Taiwan's machine-tool industry to have set up 40 plants and 26 brands worldwide mostly through acquisitions and partnerships, in 2013 steered the group to spend around 100 million euro to wholly acquire six subsidiaries of the German MAG Group. In 2014, it acquired an 80% stake in DMC of South Korea for 20 billion won (US$14.5 million) and took over Ikegai Corp. of Japan, a major maker of heavy-duty lathes, as well as formed a joint venture with Cosmos of India for around US$10 million, and plans to buy one more 180-year-old German lathe maker.

The 50-50 joint venture, Feeler Cosmos, Fair Friend set up with Cosmos, makes machining centers for the Indian machine-tool market, which is projected to bring in NT$5 billion (US$166.6 million) in revenue by 2020, according to Chu. The joint venture plans to make 40 systems monthly in 2015 and ultimately put out 2,000 machines yearly by 2020.

The group will add five factories in 2015 through acquisition or partnership for over US$100 million to expand into machine tools for mobile device casings, says Chu. 
 

The group proposes to set up a joint venture with a Russian company, and plans to acquire a manufacturer or set up a new factory in Brazil and Turkey, with plans to acquire 51% stake in a listed company in Switzerland.

Also it is negotiating with two heavyweight machine-tool makers in China, with Chu aiming to take 51% stake in one of the two, a debt-free, listed company with annual revenue of around RMB1.5 billion (US$245.9 million), and another with average revenue of around RMB2 billion (US$327.8 million).

The planned global expansions would raise Fair Friend's revenue from machine-tool sales to above NT$50 billion (US$1.6 billion) by 2015 from 2014's NT$45 billion (US$1.5 billion). 
 

The group is also boosting production capacity both in Taiwan and China, and will begin  constructing an operations headquarters-cum-R&D center in Hanzhou City, China, by the end of 2015 for around US$50 million to quickly boost a market share in the mainland, already Taiwan's biggest export destination for machine tools.

The group has developed plants in Hangzhou's Xiaoshan, Jiangdong, and Xiasha districts of the city. The Xiaoshan site mostly makes lathes and vertical and horizontal machining centers priced from RMB400,000 (US$65,500) to RMB2.3 million (US$76,600) apiece, with machining centers constituting 70% of total output, and the plant's annual revenue being around RMB1.2-1.3 billion (US$196.7-213.1 million) in recent years. 

Fair Friend's Xiasha site occupies 303 hectares  and accommodates two subsidiaries that make forklifts, mid- and big-sized CNC lathes. The Jiangdong site stands on 360 hectares, 160 hectares of which have been developed to make CNC lathes and pneumatic compressors. The group plans to develop the remaining land in five years to make other machine tools. 
 

Chu estimates corporate operations in China to generate revenue in excess of NT$18 billion (US$600 million) in 2014, up from 2013's NT$14 billion (US$466 million).

In Taiwan, the group will put aside US$100 million for expansion, one third of which earmarked to build a factory at the Taichung City Precision Machinery Innovation Technology Park to make high-end five-axis machining centers and heavy-duty horizontal machining centers with projected annual revenue of NT$3 billion (US$100 million). 
 

Fair Friend will go public in Taiwan by 2017 to become Taiwan's largest listed machine-tool manufacturing conglomerate by market revenue, which, according to Chu, will exceed the combined revenue of the eight public machine-tool makers on the island, including AWEA Mechantronic Co., Ltd., Goodway Machine Corp., Roundtop Machinery Industries Co., Ltd., Tongtain Machine & Tool Co., Ltd., Kao Fong Machinery Co., Ltd., Falcon Machine Tool Co., Ltd., Taiwan Takisawa Technology Co., Ltd. and Shieh Yih Machinery Industry Co., Ltd. 

 

The 1974-founded group runs four businesses: machine tool, printed circuit board, industrial equipment and components, and green energy.

Chu projects its machine-tool business to generate revenue of approximately NT$55 billion (US$1.8 billion) in 2015 worldwide, up from 2014's estimated NT$45 billion (US$1.3 billion) and 2013's NT$41 billion (US$1.3 billion), with 2013 consolidated revenue of NT$72 billion (US$2.4 billion).

Fair Friend estimates sales in Germany, Italy, the United States, Taiwan, China, and Japan to rise 30%, 25%, 15%, 30%, 50% and 200%, respectively, in 2015.