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Machine Tool Makers Push Whole-Plant, Whole-Line Sales

2003/04/25 | By

Machine-tool manufacturers in Taiwan, including such major outfits as Tong-Tai Machine & Tool Co., Fair Friend Enterprise Co., and Falcon Machine Tools Co., have steadily increased their production of whole- plant and whole-line machinery aimed at the mainland Chinese market in recent years. Such products, they say, offer profit margins that are up to 20% better than those available with single machines.

Many of the Taiwan-made whole plants have gone to manufacturers of automobile and motorcycle parts, as well as home appliances.

Falcon, which specializes in the manufacture of grinding machines and machining centers, has even set up a new subsidiary to focus on computerized numerically controlled (CNC) lathes. The addition of these new machines to Falcon's product line will give the company more room to develop the whole-plant and whole-line market.

Most of Taiwan's machine-tool makers concentrate on standard instead of special- purpose models. Tong-Tai is an exception in that it divides its attention between standard and special-purpose machine tools, giving it a strong capability for turning out whole-plant equipment. "Machine-tool manufacturers should have a strong ability to integrate different kinds of machinery so that they can help their customers plan whole-plant and whole-line production facilities," comments Tong-Tai's vice president Wang Kun-chung.

To upgrade its production technology and enhance its integration capability, Tong-Tai has sent its people to Japan over the past five years to learn advanced technologies. These personnel, who studied the Japanese language even as they learned the technologies in question, are now able to help Japanese customers plan and build whole plants and whole production lines.

Responding to Sluggishness

Tong-Tai has helped a number of Japanese companies set up automated lines in mainland China for the production of auto parts and compressors in recent years. "In response to the sluggish economy," Wang comments, "many automobile and motorcycle manufacturers have increased their local- content ratios. In the past they generally commissioned specialized producers to turn out parts on an original equipment manufacturer (OEM) basis; in recent years, however, they have begun establishing whole-plant production facilities to turn out key parts and components in-house."

Since the beginning of this year Tong-Tai has received an increasing volume of orders from Japanese auto and motorcycle makers who are expanding production in the mainland. In the first eight months of 2002, whole-plant and whole-line orders from Japan for the production of automobile, motorcycle, and home-appliance parts reached a total of NT$460 million (US$13.18 million at NT$34.9:US$1)¡Xup a huge 58% over the NT$290 million (US$8.3 million) worth of such orders taken in the same period of last year.

Fair Friend, which is one of Taiwan's biggest makers of CNC machine tools, has been helping mainland Chinese auto and motorcycle manufacturers establish production lines, intensifying its efforts by setting up its own factory in Hangzhou, Zhejiang Province a year and a half ago.

The company's export manager, C.H. Chang, reports that whole-plant and whole-line equipment can generate profit margins that are 5% to 15% higher than those for single-unit machines. Unsurprisingly, the company is working hard to boost its whole-plant sales in the mainland.

The company expects to earn NT$800 million (US$22.92 million) in revenues on its mainland operations this year. Of that total, 40% will come from whole-plant and whole-line equipment sales. Falcon is also looking for sales possibilities in other markets around the world.

To take advantage of the relatively high profits available from whole-plant equipment, Falcon recently set up an affiliate with the aim of adding CNC lathes to its existing product line, mainly machining centers and grinding machines. "We'll start rolling out CNC lathes at the beginning of next year," comments the company's vice president, C.K. Hsu. "When that happens we will be ready to capture new market opportunities by helping our customers set up whole-plant facilities."