Machine-Tool Manufacturers Rush Into U.S. and Europe

After laying a solid foundation in the domestic and mainland Chinese markets over the past few years, some Taiwanese manufacturers of machine tools, including Victor Taichung Machinery Works Co., Ltd., Leadwell CNC Machines Mfg. Corp., and Kao Fong Machinery Co., Ltd., are preparing to expand sales to the U.S. and European markets.

Victor Taichung, Taiwan's largest manufacturer of machine tools, recently set up a marketing subsidiary in Berg, Germany. Leadwell plans to add high-end machine tools to its production lines to help a U.S. sales agent launch an on-line distribution channel.

According to Sung Hsien-te, marketing manager of Leadwell, the company will sell the new machines over the Internet through its sales agents in the U.S. The new models under development include high-speed machining centers and multi-spindle complex computerized numerically controlled lathes.

In order to tap the reviving machine-tool market in Europe, Victor Taichung in August set up a marketing subsidiary in Berg, Germany. The company now has three such subsidiaries in Europe. "We added the marketing subsidiary in Germany with the intention of penetrating the machine-tool markets of Germany, and neighboring Switzerland, Austria, and Slovakia," says Hsueh Wen-chin, sales manager of Victor Taichung. "With the establishment of the marketing subsidiary, we aim to sell over 20 machine tools in these markets per year."

Kao Fong, a publicly listed machine tool maker in Taiwan, will set up a product delivery center in Chicago, USA, in October. The center will be in charge of marketing and after-sale services and help Kao Fog vie for business in the U.S.'s automobile industry. "We hope the proposed center will be able to sell over 100 machine tools next year, contributing at least NT$200 million (US$5.91 million at US$1:NT$33.8) to our annual sales revenues next year," says Kao Fong president Chan Chih-cheng

Chan says the U.S. market is on a steady track to recovery, and attributes the turnaround to tax breaks and subsidies doled out by the U.S. government in the second quarter of this year to encourage the purchase the capital goods.

As part of its U.S. strategy, Kao Fong plans to develop several new products to be sold at highly competitive prices, says Chan. The company is prepared to forego profits on its U.S. operations for three years in order to win market share, he notes.

Kao Fong plans to squeeze into the top-five list of domestic machine-tool manufacturers next year when its targeted sales turnover will reach over NT$2 billion (US$59 million). The company currently has an output of 50 machine tools per month and it plans to double that amount to 100 units next year.

To reach its production goal, Kao Fong plans to revamp its production lines to accommodate round-the-clock operations. "The substantial increase in output will help us achieve an economic scale of operation and reduce production costs," says Chan. "If we can reach our annual sales goal of NT$2 billion (US$59.17 million) next year, our after tax earnings will rise to between NT$3 (US$0.08) and NT$3.5 (US$0.1) per share."

Recently the National Science Council has given Kao Fong the go-ahead to set up a new plant at the Central Taiwan Science-based Industrial Park. Kao Fong expects the new plant to begin pilot production in 2005.

According to Chan, the new plant will initially produce two advanced machine tool models, including plasma machine tools for the semiconductor and optoelectronics industries, and double-column, vertical and horizontal machining centers. "We hope to sell 300 such machines per year, contributing NT$1 billion (US$29.58 million) to our annual revenue," he says.

Thanks to the fast growth of mainland China's automobile market, Kao Fong has rapidly increased exports to that market in the past few years. The company expects to export more than 300 machine tools to the mainland this year, an increase of 50 units from last year's level. The company says it has focused on sales to small mold makers based on the mainland's southeastern coastal area. Chan estimates that Kao Fong accounted for up to a quarter of all Taiwan-made machine tools exported to the mainland last year.