Prospects Brighten for the Machine Tool Industry

Worldwide demand for machine tools is projected to grow at a steady pace over the next few years, thanks to the steady recovery of the global economy and expected heavy investment in the 3C industries--computers, communications, and consumer electronics.

The ongoing development of the 3C industries will lead to sound, steady development in the machine-tool industry, and more orders for machine tools will come from the booming basic industries in such emerging markets as mainland China, India, Turkey, Eastern Europe, and Brazil.

According to surveys conducted by Forst & Sullivan, a big research company, the value of computerized numerically controlled (CNC) devices used in machine tools totaled US$1.51 billion in 2001 and will grow to US$1.65 billion in 2004. Over the same period, unit sales will grow from 91,000 to 103,000 units. The research organization believes that the sales value of these devices will continue at an annual compound growth rate of 3% during the next few years.

Asia's share of this market is growing. Forst & Sullivan predicts that the region will control a 33.8% share of the market next year, up from 32.2% in 2002.

Japanese machine-tool makers scrambled to set up production facilities in Southeast Asia before the Asian financial crisis struck in 1997. When that happened they suffered heavy losses, and are now looking for contract manufacturers in the region. Some are keeping their eyes on Taiwan as a source of contract suppliers or as an investment venue, and this is expected to bolster the island's machine-tool industry during the next few years.

The main competition in the line comes from Japan, South Korea, and mainland China. Taiwan-made machine tools are very popular in Southeast Asia, where they can be sold at prices 15% lower than those offered by Japanese rivals. Another factor for growth in that region is the increased number of auto-parts makers there who need cost-effective machine tools.

The mainland itself is one of the world's largest producers of machine tools, but the industry has gradually lost competitiveness there because of poor quality, delivery delay, and poor after-sales service. This situation leaves room for development by manufacturers from Taiwan and other places.

Taiwan was the world's sixth-largest producer of machine tools last year, with a total production value of NT$61 billion (US$1.78 billion). This was an increase of 15.4% over 2001. Exports of the products last year amounted to N$50.41 billion (US$1.46 billion), for an export ratio of 82%.

Mainland China was the only one of the world's top-10 consuming nations to record growth in consumption last year, according to statistics compiled by Gardner Publications, a prominent machine-industry research firm.

World's Top 10 Machine-Tool Consuming Nations Unit: US$1 million
Nations	2000	2001	2002	'02/'01
Mainland China	3,383	4,740	5,696	20.17%
Germany	5,179	5,712	4,815	-15.71%
Japan	2,795	5,254	3,441	-34.51%
United States	6,776	5,231	3,325	-36.44%
Italy	3,788	3,080	2,932	-4.81%
South Korea	2,447	1,324	1,223	-7.6%
France	1,886	1,516	1,165	-23.17%
Taiwan	875	1,118	977	-12.59%
Canada	1,926	934	867	-7.15%
Spain	873	881	819	-7.01%
Total	29,928	29,790	25,260	-15.21%
Sources: Gardner Publications; Industrial Technology Information Services Office, MOEA