Better Days Ahead for Taiwan's Fastener Makers

Taiwan ranks among the five biggest fastener exporters in the world (after 40 years of development), and the industry has upgraded itself to where it is now able to develop and certify auto fasteners. These products are expected to inject new vitality into the island's fastener manufacturers.

The island's exports have been declining in volume but growing in value. Back in 1997 exports were mainly of low-end models made of low-carbon steel and were valued at only US$1,451 billion. The value increased to US$2,379 billion in 2004 and US$2,567 billion in 2006. The increase in value means that the products have been significantly upgraded.

In an interview with CENS reporter Steve Chuang, Bruce Sun, chairman of both the Taiwan Industrial Fastener Institute and Chun Yu Works & Co., talked about the future of his industry.

Sun explained that a large number of new manufacturers have entered the line in recent years, attracted by the low technical threshold for entry, and that these new producers have brought new momentum to the industry.

Taiwan's government has played a proactive role in the industry's development as well, by supporting research in new applications for industrial fasteners and helping manufacturers to upgrade to high-end items such as alloy fasteners and ultra-miniature screws for electronics products.

The industriousness and conscientiousness of Taiwanese workers have also helped, Su said: "Taiwan's fastener makers work relatively hard and might travel to two or three foreign countries in a month, tiring themselves out in the search for more business opportunities. This spirit is the key factor in making Taiwan a leading base of fastener supply for Japan and the rest of the world."

Lucrative Opportunities, Tough Challenges

With the world's auto population already huge and continuing to grow, auto fasteners present lucrative new opportunities and tough new challenges for Taiwanese manufacturers.

Fierce competition among automakers has driven them to outsource parts and fasteners to cheaper overseas suppliers in order to keep their production costs down. This development, of course, is good for contract manufacturers, who can make several times the profit margin from auto fasteners as they can from other fasteners.

Before they can take advantage of the higher margins, however, manufacturers have to get their products certified, and this need poses severe challenges. For instance, Sun pointed out, Taiwan's electroplating technology is underdeveloped. "In the past," he explained, "Taiwan's fastener makers didn't pay much attention to this technology, so they haven't accumulated enough electroplating know-how, and are unable to make auto fasteners that meet the requirements of today's large auto makers."

To overcome this deficiency, Taiwan's Metal Industries Research & Development Center banded together with four local fastener makers in a new joint venture headed by the Modern Plating Corp. of the United States in July 2005.

The joint venture, dubbed Modern Plating Asian Pacific, specializes in electroplating and surface coating services. It is expected to help domestic suppliers quickly absorb the know-how they need to become certified by such big-name carmakers as GM, Ford, and Chrysler.

In addition, the China Steel Corp., Taiwan's largest supplier of steel materials, recently entered into an alliance with some of the island's foremost fastener makers to form an integrated supply chain for auto fasteners and enable the manufacturers to turn out products that conform to international standards such as ISO and TS16949.

"Modern Plating's president used to tell me that Taiwanese suppliers should come together as a group to develop this field," Sun commented. "This makes sense, because automakers usually ask for long-term supply contracts with their fastener suppliers and the contracts often require quotations to be lowered by 3-5% every year. No single manufacturer can afford to make such price reductions; they have to work together."

Upgrading Into Aviation

Manufacturers should not stop with the development of auto fasteners, Sun stressed; they should upgrade further, to aviation fasteners. "Aircraft fasteners sell for more than US$100 per unit," he said. "That's equal to the price of several kilograms of any other kind of conventional fastener, and there is an incredibly huge difference between the two types of fasteners in terms of gross profit."

But aviation fasteners require even more stringent certification, by aircraft manufacturers, of systems and products. "System certification is a special test for fastener makers," Sun explained, "because it requires them to have a clear knowledge of the entire aircraft production process. The certification of such fasteners also involves their durability and safety." Sun's own company, Chun Yu, has allied with four other local suppliers to develop the technology needed for certification.

The alliance has been encouraged by a big fastener order from the Boeing Co., which is expected to open a new window of business opportunity for the manufacturers involved.

China has long been a strong competitor to Taiwan's fastener industry, but its competitive advantage is being eroded by rising land and labor costs. In addition, a growing awareness of health and welfare among Chinese workers, and more strict regulation, have resulted in a huge increase in production costs for foreign-invested manufacturers there. This is good news for Taiwanese suppliers.

"The [Chinese] government is urging its conventional, high-energy-consumption and eco-hazardous industries to move inland [from coastal areas] by strengthening the rule of law in an effort to upgrade the industrial structure along its southeastern coast," Sun noted. "This will greatly erode the competitiveness of China's fastener suppliers."

To take advantage of the opportunities arising from this development, Taiwanese fastener makers should continue sharpening their competitive edge by improving their production capabilities and processes via such means as reducing material waste and using more advanced manufacturing equipment to achieve better efficiency. "I'm confident that Taiwanese fastener makers will see brighter prospects starting this year," Sun concluded, "because they are better able than their competitors anywhere else in the world to adapt to global trends."

Taiwan's Fastener Exports, 1997-2006
Year	Volume (KG)	Global Market Share	Annual Growth	Value (USD)	Global Market Share	Annual Growth
1997	1.003 B.	7.58%	16.61%	1.451 B.	6.81%	6.55%
1998	1.112 B.	8.40%	10.90%	1.506 B.	1.06%	3.81%
1999	1.139 B.	8.60%	2.42%	1.492 B.	7.00%	-0.92%
2000	1.249 B.	9.44%	9.66%	1.707 B.	8.00%	14.36%
2001	1.084 B.	8.19%	-13.23%	1.461 B.	6.85%	-14.38%
2002	1.201 B.	9.07%	10.79%	1.559 B.	7.31%	6.66%
2003	1.274 B.	9.62%	6.08%	1.818 B.	8.53%	16.63%
2004	1.411 B.	10.66%	10.77%	2.379 B.	11.16%	30.88%
2005	1.266 B.	9.56%	-10.33%	2.491 B.	11.68%	4.69%
2006	1.270 B.	9.59%	0.32%	2.567 B.	12.04%	3.07%
2007 (Estimated)	1.231 B.	9.30%	-3.04%	2.890 B.	13.55%	12.57%

Source: Taiwan Industrial Fastener Institute

World's Top 5 Fastener Exporting Countries, 2002-2005
Ranking	2005		2004		2003		2002
	Country	Value (USD)	Country	Value (USD)	Country	Value (USD)	Country	Value (USD)
1	Germany	2.951 B.	Germany	2.814 B.	Germany	2.219 B.	Germany	1.779 B.
2	China	2.573 B.	Taiwan	2.352 B.	Taiwan	1.815 B.	U.S.	1.673 B.
3	Taiwan	2.458 B.	China	1.868 B.	U.S.	1.716 B.	Taiwan	1.557 B.
4	U.S.	2.214 B.	U.S.	1.777 B.	Japan	1.363 B.	Japan	1.238 B.
5	Japan	1.813 B.	Japan	1.651 B.	China	1.132 B.	China	0.815 B.
Total Export Value	17.177 B.		15.433 B.		12.206 B.		9.509 B.

Source: Metal Industries Research & Development Center