Machine-tool Orders Jam Taiwan's Production Lines

Thanks to the economic recovery, Taiwan's machine-tool industry is booming. Major manufacturers such as the Goodway Machine Corp., Awea Mechantronic Corp., Kao Fong Machinery Co., Victor Taichung Machinery Works Co., and Tongtai Machine & Tool Co. all experienced a sales growth of more than 100% in the first four months of the year, and their production lines are booked full through the second quarter.

Spurred by the expected signing of the cross-straits economic cooperation framework agreement (ECFA) along with the economic upturn, the island's machinery industry, including the machine-tool sub-sector, has a good chance of returning to the pre-recession level of 2008, notes C.C. Wang, president of Taiwan Association of Machinery Industry (TAMI).

According to customs statistics compiled by TAMI, Taiwan's machinery exports in the first four months increased 41.3% year-on-year to reach US$4.716 billion.

Goodway chalked up sales of NT$547 million (US$17.04 million at NT$32.1:US$1) in the four-month period, up 147.28% year-on-year, and predicts that shipments in May alone will top NT$200 million (US$6.23 million). The NT$600 million (US$18.69 million) worth of orders that are already in hand will keep the company's production lines humming to the end of July.

Awea registered NT$671 million (US$20.9 million) in sales during the period, an improvement of 161.8% from a year earlier. Goodway and Awea both focus on premium CNC (computerized numerically controlled) machine tools, and both belong to the same business conglomerate.

Edward Yang, chairman of both companies, reports that their combined sales plummeted 58% to NT$2.568 billion (US$80 million) last year, down from NT$6.056 billion (US$188.66 million) in 2008. He predicts that the combined sales of the two companies will return to the pre-recession level of NT$5 billion (US$155.76 million) this year, NT$2 billion (US$62.3 million) for Goodway, NT$3 billion (US$93.45 million) for Awea.

Thanks to the strong recovery of machine-tool manufacturing, Taiwan's leading makers of machine-tool parts and components, especially ball screws, have had to speed up their production as well.

The Hiwin Technology Corp., Taiwan's leading supplier of linear-motion devices and technologies, saw its sales mount to NT$2.052 billion (US$63.92 million) in the first four months of this year, up a whopping 186.46% from the same period of 2009. The company predicts its monthly sales will surpass NT$600 million (US$18.69 million) in May and hit a historic high. The company expects that its revenues for the year as a whole may break the NT$10 billion (US$311.52 million) mark.

Hiwin chairman Eric Y.T. Chuo says that the company has been taking orders not only from the domestic market but also from China, Japan, South Korea, Southeast Asia, and Europe. The ongoing influx of orders has forced the firm to add a night shift to increase output; 600 new workers were recruited in the first four months of the year, and another 1,200 will be needed in the months to come.

Kao Fong, one of Taiwan's leading manufacturers of CNC machine tools, registered NT$379 million (US$11.8 million) in sales in the first four months, up 231.77%. Based on the orders in hand, the company expected to score over NT$120 million (US$3.73 million) in sales in May alone.

K.J. Shen, president of the company, boasts that Kao Fong has NT$600 million (US$18.69 million) worth of orders in hand, 80% of them from mainland China, enough to keep production lines going to the end of September.

Shen attributes much of the boom in orders for machine tools to burgeoning demand from the manufacturers of automobile and motorcycle parts as well as molds and dies.

The company also benefited from advanced orders from domestic clients stocking up ahead of price hikes in April.

Despite the huge growth in business in the past few months, Shen cautions that prospects for the machine-tool industry remain murky and should be closely watched, since the European financial crisis hasn't yet settled down.

Tongtai, which concentrates on CNC machine tools and PCB (printed circuit board) drilling machines, recorded NT$503 million (US$15.66 million) in sales in April, up 217.9% year-on-year and returning to the 2008 level. Sales for the January-April period reached NT$1.571 billion (US$48.94 million), up about 100%. The company claims enough orders to keep it humming to the end of September.

Victor Taichung president Bert M.H. Huang says that his company received NT$1.2 billion (US$37.38 million) worth of orders in April alone, hitting a historic high. The company's sales for the first four months reached NT$2.4 billion (US$74.76 million), up 188%, and there are enough orders in hand to keep production full till the end of September.

The company claims that it has orders for over 1,000 sets of machine tools and plastic injection molding machines, 70% of them from mainland China. By the end of the year, Victor Taichung will have to deliver 400 plastic injection molding machines to Hon Hai Precision Industry Co. to facilitate production in mainland China.

Huang notes that the machinery industry is included in ECFA's “early-harvest” list, which will help boost the competitiveness of Taiwan's machinery manufacturers over rival suppliers in Japan and South Korea.

TAMI predicts that the overall production value of Taiwan's machinery industry will top NT$900 billion (US$28.03 billion) this year, up 32% from 2009's NT$680 billion (US$21.18 billion). Of this total, the production value of machine tools is estimated at NT$110 billion (US$3.42 billion) to NT$120 billion (US$3.73 billion), an increase of at least 50% from last year's NT$73 billion (US$2.27 billion).