Taiwan's Golf Equipment Makers Boost Production To Meet Rising OEM Demand

Leading golf-equipment makers in Taiwan experienced sharp growth in sales in the first quarter of 2004, thanks to increasing OEM (original equipment manufacturer) orders from major international vendors, according to industry sources.

Leading international brands, including Callaway, Cobra, Lynx, Nike, TaylorMade, Titleist, and Wilson, outsource the bulk of their golf-club head production to Taiwanese companies.

Intensified global competition has forced leading vendors in the United States and Japan to oursource their production, especially of golf-club heads, the sources say. This is good news for Taiwanese makers, who have built up a reputation for being able to produce quality golf equipment at competitive prices.

To maintain this capability, they have kept production costs down by moving labor-intensive manufacturing processes such as finishing to mainland China, while keeping management and high-tech processes such as the casting of heads in Taiwan.

The island's top four makers of golf-club heads-Fu Sheng Industrial Co., Advanced International Multitech Co., O-TA Precision Industry Co., and Dynamic Precision Industry Corp.-have all adopted this strategy.

"This division of labor has enabled Taiwan's producers to capture 70% to 80% of the world market for club heads," claims W.L. Lu, a senior Fu Sheng executive who serves as special assistant to the company's chairman, Lee Hou-teng.

Thanks to this success, local manufacturers have enjoyed double-digit growth in recent years while overall global demand for golf-club heads has maintained a growth pace of 5% to 6%, Lu comments. He expects this trend to continue for several more years, at least.

Expanding Production to Meet Demand

To cope with the increasing demand, Taiwan's top four manufacturers are continuing to expand their production both at home and abroad. For example, Lu reports, Fu Sheng-the biggest maker of golf-club heads in the world-plans to add two more production lines at its plant in mainland China's Shenzhen, Guangdong Province this year. The increased capacity will be used to make titanium club heads.

The plant employs 10,000 workers, 8,000 of whom are assigned to the production of golf equipment.

Fu Sheng also operates two plants in Taiwan, one in Taoyuan in the north and the other in Kaohsiung in the south. Together, the three factories rolled out about 13 million club heads last year, including 3.25 million titanium models, valued at a total of NT$10.8 billion (US$323 million at NT$33.4:US$1).

The core unit for the production of Fu Sheng's titanium metalwood and iron club heads is the Taoyuan plant, which has eight titanium furnaces. The ISO9001 facility also turns out sheet-rolling and filament-wound graphite shafts.

Golf equipment accounts for about 80% of the company's revenues, with the rest from air compressors and information-technology (IT) products. Total consolidated revenues for the first two months of this year amounted to NT$3.36 billion (US$100 million), up 16% from the same period of 2003.

Record Revenues

Advanced International is also expanding, adding capacity to its mainland Chinese plant so as to boost production of golf-club heads to 5.4 million units this year, up from 4.15 million units in 2003, according to chairman Bernard Cheng. If necessitated by a surge in orders, Cheng says, production could be further ramped up to 6.5 million or seven million units.

Another planned expansion involves an investment of US$10 million in a Vietnamese plant for the production of heads and clubs for the entry-level to mid-level segments of the market. The planned facility will have a work force of 700 to 800; it is expected to begin mass production in the second quarter of next year, and to turn profitable in 2008.


The company saw its revenues jump 43.2% year-on-year to reach a record NT$489 million (US$14.64 million) in February. Unaudited revenues for the first two months of 2004 reached NT$966 million (29 million), up 21.1%.

Advanced International has begun delivering high-end golf-club heads to TaylorMade for sale in the Japanese and American markets. This business, Cheng says, will help boost first-quarter revenues to NT$1.4 billion (US$42 million).

A particularly profitable part of the business is graphite shafts, which provide gross margins of around 25%. Sales of the company's sheet-rolling and filament-wound graphite shafts soared 40% in 2003 and are expected to rise another 30% this year, Cheng notes.

Other Pros in the Clubhouse


O-TA Precision Industry reports that it makes 80% of its club heads on an ODM (original design manufacturer) basis. Of the total output, more than 80% is shipped to Bridgestone, 20% to Nike, and 10% to Callaway. Some also go to TaylorMade.

The company set records for revenues in the first two months of this year, reaching NT$460 million (US$13.77 million) in February, according to company sources. This was a 30% jump over January.

Dynamic Precision Industry already has a titanium head plant in Kaohsiung that turns out 20,000 units a month, and is building a second one there that will add another 30,000 units. The new NT$120 million (US$3.59 million) facility will be completed in September this year, according to company chairman Chinneng Lin.

Construction of the new plant was prompted by large orders for golf heads and putters received from TaylorMade earlier this year. Lin says that his production capacity is now fully booked to the end of 2004.

The new facility will be equipped with a titanium furnace as well as other sophisticated processing equipment, and there is provision for further capacity expansion to 50,000 titanium heads should demand require it, Lin says.

Dynamic rolled out 2.6 million golf-club heads from its plants in Taiwan and mainland China in 2003: 2 million iron heads, 335,000 titanium heads, and 265,000 metalwoods heads. Lin expects revenues to grow 22% in 2004, to NT$1.5 billion (US$44.91 million) this year.

The company plans to file an application with the Economics Ministry to set up a global operations center in Taiwan with the aim of channeling more resources into the strengthening of its profitability and competitiveness, Lin says.

Taiwan Strong Sporting Goods Inc., another leading Taiwan maker of graphite composite products, reports that sales of its graphite golf shafts rose 20% in the first two months of 2004, and that the growth trend is expected to extend into the second half of the year.

In addition to golf-club shafts, the company's product line includes baseball bats, hockey sticks, bicycle parts, and tennis, squash, and badminton rackets. Golf shafts account for 45% of total production. An 800-worker plant in mainland China handles about 80% of total output.

All of Dynamic's graphite club shafts are shipped to OEM clients in the U.S., Japan, and other markets, reports chairman Liao Chi-hua.

Despite the increase in orders this year, the company has no plans to boost production of graphic shafts, Liao says. "The market for graphite shafts has become mature and is unlikely to grow sharply in the future," he explains. Another factor is that Taiwan's technological edge in the field may soon be matched by manufacturers in mainland China.

To cope, Dynamic plans to diversify its product line to include graphite bicycle parts such as frames in the near future, Liao states.