ITRI Spin-offs Boost Industrial Upgrading

Over the past few years, the Mechanical Industry Research Laboratories (MIRL) under the government-backed Industrial Technology Research Institute has been injecting new technology into the economy by helping create 10-strong spin-offs.

At present, these MIRL-birthed companies have annual combined sales of over NT$30 billion (US$892.85 million at US$1:NT$33.6). They have also been contributing to industrial upgrading and helping the domestic machinery industry to develop in a sound and sustainable way. These spin-offs are Mirle Automation Corp., Rechi Precision Co., Deta International Co., Luren Precision Co., China Engine Corp., Kinik Precision Grinding Corp., Crystalwise Technology Inc., PolyVane Technology Co., Yi Shang Technology Co., and Neo Precision Technology Co.

With the financial support from the Department of Industrial Technology under the Ministry of Economic Affairs, over the past several years ITRI has been playing a key role in creating startups through technology transfers. The successful example is modeled after the successes of United Microelectronics Corp. and Taiwan Semiconductor Mfg. Co., which were spun off from the Electronics Research & Service Organization (ERSO) under ITRI in 1980 and 1987, respectively.

Spinning Profits

Focusing on the development and production of automation equipment, Mirle was spun off from MIRL in 1989. The company aims to achieve revenue of NT$4.4 billion (US$130.95 million) in 2005 with after-tax earnings per share set at over NT$3 (US$0.089).

Rechi Precision is a specialist manufacturer of compressors and related parts. The company estimated it would see total revenue in 2005 topping the NT$3.1 billion (US$92.26 million) it posted in 2004.

About 11 years ago, the MIRL transferred key technologies derived from its "Precision Gear Development Project" to private firms, including Princo Corporation, Saynen Industrial Co., Chuan Hong Co., Jota Bearing Co., Gong Ji Chang Co., Jih Fong Machinery Co., which raised NT$25 million (US$744, 000) to set up Luren Precision.

Luren Precision specializes in the development and production of gear cutting tools and carbide hobs. The company has a wide customer base, including such large-sized automobile manufacturers as Kwang Yang Motor Co., Sanyang Industry Co. and Yamaha Motor Taiwan Co.

Deta International, founded 11 years ago, mainly concentrates on the development and production of automatic tool changers used in precision machine tools. In its first-year operation, the company had sales of only NT$10 million (US$297, 600). But the company jacked up revenue past the NT$500 million (US$14.88 million) mark last year, making it one of the world's largest manufacturers in this field.

With paid-in capital of NT$10 million (US$297, 600), Deta has a work force of 75. Despite its small size, the company expects to post revenue of about NT$600 million (US$17.85 million) in 2005.

Huang Yao-te, president of Deta, says he was a deputy researcher in the MIRL 11 years ago when he decided to start up a manufacturing firm in cooperation with his wife Yen An-an, now financial manager of the company. Huang says his company has competitive edge in the high quality and diversity of automatic tool changers it supplies.

High Precision

Neo Precision, established in June 2005 in Taichung City, central Taiwan, acquired key technologies from the MIRL and now focuses on the development of built-in high-speed spindles, direct-drive high-speed spindles, and precision rotary tables.

At present Neo has two production facilities at the Taichung Industrial Park with a total annual production capacity of 1, 600 direct-drive-type and 800 built-in high-speed spindles.

Neo was co-founded by former MIRL officials, including the laboratories' former deputy director general Cheng Chen who is president of Neo. Chen says his company will not compete with domestic manufacturers, but has rather positioned itself as a manufacturer of high-end spindles with high quality, machining accuracy, and lifespan, and strong after-sales services.

MIRL director general Ivan T.C. Wu notes high-speed spindles are the most important component in machine tools.

The company comprises a strong management team. Its major shareholders are leaders in the domestic machinery industry, and the technical team is recruited from MIRL.

Since its establishment, Neo has focused on the production of high-quality spindles, and today it continues to develop the most sophisticated technologies to support its production. A newcomer in the machinery world, the company vows to develop as one of the world's best manufacturers of high-speed spindles.

Concentrating on the development and production of high-end products, Neo hopes to directly challenge the world's top-four producers of high-speed spindles, including Fisher, GMN, Wiess and IBAG.

Chen predicts his company would see annual sales reach NT$400 million (US$11.9 million) in three years, becoming the largest supplier of high-speed spindles in Asia. Within the next decade, the company hopes to become one of the world's top-10 suppliers of such products.

Currently Taiwan demands 25, 000 belt-type, 900 direct-drive-type, and 500 built-in spindles per year. Neo has no plans to make lower-end products such as belt-type spindles, which are priced at less than NT$20, 000 (US$595) each.

In the early stage of its inauguration, Neo will have an annual output of 100 spindles with production value of NT$100 million (US$2.97 million), meeting 25% of the domestic market demand for high-end spindles. The rollout of the high-speed spindles will facilitate fast growth of domestic high-end machine-tool market and help domestic producers penetrate the global marketplace.

Ambitious Development Goal

Taiwan's government has set a goal to help the domestic machine-tool industry double annual production value to NT$200 billion (US$5.95 billion) in 2008. To meet the goal, a research and development union has been formed to focus on the development of such high-end machine tools as five-axis machine tools and multi-task lathes with milling functions.

Domestic large-sized machine-tool manufacturers, including Victor Taichung Machinery Works Co., Awea Mechantronic Corp., Gentiger Machinery Industrial Co., Kao Fong Machinery Co., and Eumach Co., have welcomed the establishment of Neo. These companies believe that Neo's high-quality spindles will help them cut procurement costs by 30%, relieving their over-reliance on high-price imported spindles made by Switzerland and Germany.

Chang Tsan-hui, director of the MIRL's Intelligent Mobility Technology Division, says almost all spin-offs from the MIRL have survived with the help of their advanced manufacturing technologies. He expects MIRL to spin off other high performers in the near future.