Strong Demand in Asia Keeps Taiwan Machine-tool Makers Hopeful

Several makers report output to 2008

Battered by the global meltdown, Taiwan's machine-tool industry would likely post a 50% decline in output and exports in 2009, after all the numbers are in. Looking ahead towards 2010, Taiwan's sagging machine-tool industry will hopefully be driven by the relatively better recovery seen in Asia, including China, India and the ASEAN (Association of Southeast Asian Nations) members, which demands high-quality yet popularly priced machine tools to continue pushing industrial development.

Reporting good news fueled by strong demand in Asia, several major makers in Taiwan of machine tools, including Victor Taichung Machinery Works Co., Goodway Machine Corp., Tongtai Machine & Tool Co., She Hong Industrial Co., Yeong Ching Machinery Industries Co., Far East Machinery Co., and Hiwin Technologies Corp., say they will likely see steady growth in 2010, with most among the group believing Taiwan's machine-tool industry will see 2010 output and exports exceed 70% of that registered in the peak year of 2008. Such rosy projections will likely keep many domestic machine tool makers from being mired in the red in 2010.

Backed by regaining confidence among machine-tool manufacturers, the Taiwan Association of Machinery Industry (TAMI) will hold the MT Duo exhibition (Taipei CNC Machine Tool & Manufacturing Technology Show), slated for May 5-11 at the Taipei World Trade Center, to show global buyers that Taiwan-made products are especially competitive amid rising competition in a recovering economy, when buyers look for a sharper edge with cost effectiveness.

Global Presence

Not to miss out on potential opportunities to build global presence and business, the TAMI will organize machine-tool firms in Taiwan to take part in major machine-tool shows, including the Nanjing Machine Tool Show in Nanjing, China; International Manufacturing Technology Show (IMTS) in Chicago, the U.S. and the Japan International Machine Tool Show (JIMTOS) in Tokyo, Japan.

Cross-strait Cooperation

Further tapping opportunities perhaps available in China as a long-time, the largest export destination for Taiwan-made machinery, the TAMI held the first industrial cooperation and interchange conference in Taipei in December 2009, inviting makers from both sides to attend. Mostly as gesture of goodwill, both sides signed a cooperative letter-of-intent, calling for technical interchange, skill cultivation and training and industrial cooperation, aiming to set up a mechanism for cooperation and industrial research without distrust. TAMI chairman H.T. Hsu notes signing the letter- of-intent aims to help Taiwan-based machinery manufacturers expand presence in China.

Sharp Downturn

According to customs-cleared statistics compiled by the TAMI, Taiwan's machine-tool industry was battered by the global crash in 2009, ending the seven-year boom. TAMI says Taiwan exported US$1.4058 billion of machine tools in the first 10 months of 2009, down 56.5% from a year earlier, with many still not seeing returning orders from abroad.

TAMI says the export values of the top-two items made-in-Taiwan—machining centers and metal-forming machines—plummeted. The TAMI tallies show Taiwan exported US$1.07 billion of machining centers in the first 10 months of 2009, down a whopping 58.4%. The export value of metal-forming machines totaled US$349 million in the same period, down 49%.

Ripple Effect

C.C. Wang, TAMI president, echoing what has been widely reported in media, says that all machinery manufacturers worldwide are battered by the ripple effect of the global crash, with tightened credits straining especially small business financing and consumption. Despite many official stimulus programs, Wang predicts that Germany, the world's leading machinery producer, would likely see a 50% annual cut in orders received and 40% decline in yearly output in 2009; while the U.S. would post a 39% dip in sales year-on-year of machine tools in 2009.

The TAMI president says that Taiwan's machine-tool industry would post a 50% annual drop in output and export value in 2009, similar to that for Germany and South Korea but better than the 60%-70% decline for Japan.

Wang believes Asian nations are still largely relied upon to supply low-priced commodities, including machinery, to meet American and European demands amid the economic downturn. Further offering promising news, Wang says that Asian economies, especially China, ASEAN and India, will perform very well in 2010 relative to the previous year.

“With Taiwan still being the center for manufacturing price-competitive, high-quality machine tools, local makers should be better positioned than rivals from Germany, Japan and Italy, who are taken-for-granted as industry leaders, to land orders in 2010,” Wang says. “I believe the Taiwanese machine-tool industry can easily meet 70% of its output recorded in the peak year of 2008. If the American and European economies also return to pre-meltdown levels, the local machine-tool industry will stand a better chance to generate profitability earlier than expected.”

China-driven Recovery

With massive stimulus measures that have pushed up sales of electronics and cars in China to record-setting levels, spelling good news for all kinds of suppliers of various scales, many major Taiwan-based makers of machine tools and components—including Hiwin Technologies Corp., Victor Taichung Machinery Works Co., Fair Friend Enterprise Co., Far East Machinery Co., Awea Mechantronic Co., Kao Fong Machinery Co., Wele Mechatronic Co. and Habor Precise Industries Co.—are reporting promising news: output has returned to 60% to 70% of the peak in 2008.

Confirming such uptrend, Wele says that its Hsinchu plant is scheduling overtime work to meet the influx of orders that are expected to keep production lines busy till the end of March 2010. Overflowing orders also keep production lines run at full capacity at Hiwin, with the recovery having driven the company to budget NT$1.2 billion (US$37.73 million) to build a new plant starting sometime in March 2010 at the Taichung Precision Machinery Innovation Park.