AFHTA Formed by MIRDC to Help Taiwan Fastener Makers Go Global
2008/08/25 | By Steve ChuangAmong many strategies adopted to cope with the reckless underselling by mainland Chinese competitors in the global fastener segment, Taiwan-based suppliers have chosen to go upmarket, or engage in R&D and fabrication of OE (original equipment) automotive fasteners in recent years. However, it may be easier said than done as measuring up to OE standards, especially for high-end makes and models, would likely require crossing considerable technical thresholds, or meeting specifications related to various mechanical characteristics such a bending strength, hardness, corrosion resistance etc. A group of fastener suppliers in Taiwan, however, have taken a step in the right direction to give the segment in Taiwan a better chance to take on the fierce undercutting Chinese rivals-forming the Automotive Fastener Heat Treatment Alliance (AFHTA) earlier this year.
Without resting on its laurels, the fastener making segment in Taiwan has been shaken awake by the mainland Chinese competitors as they continue to catch up with the more developed parts of the world, including Taiwan-that the fastener segment on the island is losing its global dominance faster than has been expected over the past few years. Taiwan in 2003 exported US$1.826 billion of fasteners as the world's second-ranking supplier, while China was fifth with US$1.132 billion, but then surprisingly advanced three notches to number two by 2006, exporting some US$3.36 billion, whereas Taiwan fell to No. 4 with US$2.584 billion in the same year.
Upgrading Production
To hone its edge in the global market, Taiwan-based suppliers have been paying considerable attention to upgrading production techniques-trying to turn out value-added fasteners, mainly automotive fasteners, with such efforts actually having paid off in the AM (aftermarket) and DIY (do-it-yourself) segments. Also, Taiwan's steadily growing average export value has somehow proven their efforts effective. In 2006, the island's export value grew to US$2.02 per kilogram from US$0.927 posted in 2003, but, however, was only higher than Korea's US$1.94, Portugal's US$1.74 and China's US$1.02 among the world's top-20 fastener exporters that year. Such performance means that there remains more room for improvement for the Taiwan fastener sector.
Outside efforts made by the private sector, the AFHTA is the official response from the MOEA (Ministry of Economic Affairs) in Taiwan, who has authorized the Metal Industries Research & Development Centre (MIRDC) to partner with industry insiders to form such Alliance to engage in R&D to help the local suppliers improve production capability-in other words sharpen their edge. Yo Kun-bing, MIRDC's project manager in charge of the Alliance, revealed in an interview the ways with which it will contribute to the fastener sector.
A New Force
Founded in 1963 in Taiwan's southern port city of Kaohsiung and engaged in development and consulting on metal technologies, MIRDC is undoubtedly an unsung hero who has consistently supplied metal and metallic product manufacturing sectors on the island with state-of-the-art know-how and growth momentum.
Early this year and under MOEA directions, the MIRDC partnered with three local companies-one heat treating company and two fastener makers, who have stayed intensely interested in directly supplying leading automakers with fasteners, instead of selling in the AM segment, according to Yo. The AFHTA is Taiwan's first to engage in heat treatment of automotive fasteners and is expected help the sector evolve significantly.
Yo says that heat treatment, which reinforces durability, structural strength to enhance added-value, is a critical process that determines a supplier's qualification to be an OEM maker for leading carmakers, adding that "generally, Taiwan suppliers are skilled at upstream processes as forming, threading and heading, but overlook heat and surface treatment due to relatively high costs. They circumvent such issue by cutting corners-subcontracting heat treating and electroplating firms, who can handle the jobs cheaply but without assuring stable quality."
In essence, Yo states, Taiwan fastener suppliers can skillfully handle heat treatment to turn out quality automotive fasteners meeting world-class automakers' standards; however, prolonged neglect and underdeveloped quality inspection systems for heat treatment have become major obstacles to effectively explore the OEM (original equipment manufacturing) segment.
To overcome such hindrance, the Alliance is going to introduce the American AIAG (Automotive Industry Action Group) CQI-9 (Continuous Quality Improvement) HTSA (heat treatment system assessment) into the industry via teamwork, aiming to build Taiwan into a global leader in the automotive fastener segment.
"Once successfully passing the CQI-9 assessment, Taiwan fastener suppliers can then directly supply automotive fasteners to leading automakers, which would, most importantly, double export prices to NT$100-200 per kilometer from the current NT$50-100 in the AM segment," he says. "Being CQI-9 qualified enables Taiwan makers to right away enhance the value of their fasteners to make them stronger global competitors."
Birth of AIAG
Set up in 1982 by U.S.'s big three automakers, namely General Motors, Ford Motor Company and Chrysler, AIAG is a non-profit organization providing an open platform for members to jointly work to develop new technologies. The AIAG has successfully wielded plenty of influence over the global automotive industry-setting up quite a few quality inspection standards and training courses for industry insiders. Currently, an estimated 1,500 voluntary companies within the AIAG are developing optimal solutions to standardize supply chains in the sector.
CQI, introduced by the AIAG, is a quality management concept that stresses the importance of efficient, effective processes under corporate organizational efforts and systematic management-contending that everything can be improved through daily work and experimentation in-house.
Based on the CQI core concept, CQI-9 HTSA contains a series of inspections and audits related to heat treating equipment, processes, personnel, output quality and quality control systems, and, notably, the assessment support processes defined in ISO/TS 16949 standards. In other words, the quality management process helps makers, who have been ISO 9001 and TS 16949 certified, to introduce and implement CQI HTSA in production.
CQI-9 Imperative
Responding to why CQI-9 is helping Taiwan fastener makers, Yo says that, compared with JIS in Japan, CQI-9 is widely adopted among leading European and North American automakers; so it is imperative to be CQI-9 HTSA certified to become OEM suppliers to automakers.
From another viewpoint, adopting CQI-9 can help Taiwan makers continually improve heat treatment technique. Yo says that, to achieve high capacity, some producers may place too many fasteners at once in a heat treatment oven, causing a very small portion of maybe 1 to 2 pieces to get stuck, hence failing to be properly heat treated.
"Making automotive fasteners safe hinges on carrying out proper heat treatment at specified period and temperature to achieve durability, hardness and structural strength. Without maintaining time and temperature properly during heat treatment, a fastener then will be unsafe for any vehicle," Yo stresses. "Needless to say that keeping the proper conditions is a common problem among most Taiwan fastener makers and heat treating companies."
"CQI-9 instructs factories to back up time-temperature diagrammatic charts and related data on daily operation of heat treating ovens, enabling checking such parameters when defective fasteners are found. Consequently, they must try to improve whole production lines by upgrading equipment to minimize poor quality. In short, CQI-9's strict requirements for data back-up and the core concepts of CQI help to instill in suppliers, workers correct attitudes related to quality, as well as be accountable," he adds.
Step in Right Direction
The formation of the Automotive Fastener Heat Treatment Alliance, undoubtedly, reflects the earnest effort by Taiwan fastener makers and heat treating companies to go upmarket to fend off emerging undersellers, with such effort being a groundbreaking, collective attempt to revitalize the fastener sector on the island.
"As said, proper heat treatment decides the quality and safety of automotive fasteners. The discovery, return of defective fasteners typically result in considerable penalty-calling for suppliers to compensate ten times the cost of fasteners in question. To avoid such consequences and assure product quality, Taiwan makers of automotive fastener tend to send abroad semi-finished fasteners for proper heat treatment, instead of risking business with local subcontractors," Yo says. "Such scenario discourages fastener suppliers to venture into the OEM segment, hence compromising local heat treating companies' chances to win orders."
"But, if the Alliance succeeds in educating Taiwan makers to carry out CQI in-house and become CQI-9 HTSA certified, they will hopefully become more confident and capable of handling such risky orders, and Taiwan's heat treating sector will also progress in process technology and business operation."
Auto-parts Applicable
Yo says that CQI-9 also works for safety inspection of auto parts; in other words, the Alliance will most likely play a part to contribute to the sector on the island. "This Alliance proactively brings together related industry insiders to build a promising future. I admit that we (MIRDC and the three existing companies) are still learning and practicing CQI-9 currently, which is actually a tough process," Yo says.
"However, our labor will not go without reward and our influence will spread island-wide: if the Alliance proves successful in the next two years, the Industrial Development Bureau under the Ministry of Economic Affairs will duplicate the experience in other industries," he adds. (June 2008)
Taiwan's Fastener Exports (1997~2007) | ||||||
Year | Volume | Global Market Share | Annual Growth | Value | Global Market Share | Annual Growth |
1997 | 1.003 M. | 7.58% | 16.61% | 1.451 B. | 6.81% | 6.55% |
1998 | 1.112 M. | 8.40% | 10.90% | 1.506 B. | 1.06% | 3.81% |
1999 | 1.139 M. | 8.60% | 2.42% | 1.492 B. | 7.00% | -0.92% |
2000 | 1.249 M. | 9.44% | 9.66% | 1.707 B. | 8.00% | 14.36% |
2001 | 1.084 M. | 8.19% | -13.23% | 1.461 B. | 6.85% | -14.38% |
2002 | 1.201 M. | 9.07% | 10.79% | 1.559 B. | 7.31% | 6.66% |
2003 | 1.274 M. | 9.62% | 6.08% | 1.818 B. | 8.53% | 16.63% |
2004 | 1.411 M. | 10.66% | 10.77% | 2.379 B. | 11.16% | 30.88% |
2005 | 1.266 M. | 9.56% | -10.33% | 2.491 B. | 11.68% | 4.69% |
2006 | 1.270 M. | 9.59% | 0.32% | 2.567 B. | 12.04% | 3.07% |
2007 | 1.240 M. | -- | -2.42% | 3.010 B. | -- | 14.72% |
Source: Taiwan Industrial Fastener Institute | ||||||
Taiwan Vs. China in Fastener Exports | |||||
Year | Total Export Value of Top-20 Fastener Exporters (US$1 billion) | Export Value (US$1 billion) | Global Ranking | ||
Taiwan | China | Taiwan | China | ||
2003 | 12.206 | 1.825 | 1.132 | 2 | 5 |
2004 | 15.433 | 2.391 | 1.868 | 2 | 3 |
2005 | 17.358 | 2.503 | 2.573 | 3 | 2 |
2006 | 20.007 | 2.584 | 3.360 | 4 | 2 |
Average Export Value of World's Top-20 Fastener Making Countries | |||
Average Export Value per Kg | Country (US$/Kg) | Market Share in Export Volume | Market Share in Export Value |
Above US$10 | Ireland (27.7) | 1.1% (1,746 metric tons) | 3.8% |
US$5.0-9.9 | Britain (9.18), Germany (7.44), France (7.30), Japan (7.17), Sweden (5.92), Austria (5.81) | 13.8% | 36.5% |
US$2.5-4.9 | Finland (4.75), Denmark (4.37), Spain (4.16), U.S. (3.96), Italy (3.73), Belgium (3.33), Luxembourg (2.90), Greece (2.87), Holland (2.82) | 20.6% | 28.3% |
Below US$2.4 | Taiwan (2.02), Korea (1.94), Portugal (1.74), China (1.02) | 64.5% | 31.4% |
Source: MIRDC | |||