Hard times have hit Taiwan' s hand-tool industry, which was replaced by mainland China as the world' s No. 1 supplier of the products in 2003, and manufacturers in the line are having to work harder than ever to keep afloat.

Kissinger Lin, vice chairman of the Cendai Industrial Co., laments that he has to travel more often now to solicit orders from overseas customers. "During the heyday of our industry, " he comments, "we had no shortage of orders and our employees worked an average of more than 500 hours a month. In those days, company owners didn' t care about the government' s requirement to give employees at least two days of paid vacation per month, and employees were happy with the extra work."

Those good times lasted for a decade, but now all of the island' s manufacturers in the line are following the five-workdays-a-week rule, which took effect in 2001.

Over 80% of Taiwan' s hand-tool makers are concentrated in the central part of the island. Most of the leading manufacturers, including Cendai, J&K International Co., K&W Tools Co., Kuang Yuang Industrial Co., Yih Cheng Factory Co., and Lucky-Brand Industrial Co., target the United States market, where Chinese products are taking over market share from Taiwan.

This is in sharp contrast to the prosperous days of the past. Taiwan' s hand-tool industry began taking off in the 1970s, when the appreciation of the Japanese yen prompted hand-tool buyers to switch orders from Japan to Taiwan in search of lower costs.

Today, Taiwan is no longer competitive in the hand-tool line due to high production costs, a stronger currency, and shortages of labor. As a result, the number of domestic manufacturers in the line has dropped from over 1, 000 two decades ago to some 600 now.

More Revenues, Fewer Manufacturers

Total revenues in the industry soared from NT$30.7 billion (US$959.3 million at NT$32:US$1) in 1994 to NT$51.3 billion (US$1.6 billion) in 2004. Over the same period, however, the number of manufacturers in the line fell from 960 to 620, while the industry' s total work force dropped from 17, 500 to 10, 500.

President C.F. Wu of the Proxene Tools Co. notes that manufacturers have a strong desire to stay in Taiwan, but that this is difficult because the hot, noisy, and dirty working conditions make it hard to recruit workers. "The labor shortage has become more and more serious ever since the Central Taiwan Science Park was founded, " he says. "The government should help old-economy companies resolve their labor shortage problem."

As a result of those worker shortages, jokes W.H. Huang, chief executive officer of the government-backed Metal Industrial Research and Development Center (MIRDC), owners of old-economy businesses "are eager to marry their daughters to university graduates, if those graduates are willing to enter the old-economy businesses."

Charles Hsieh, chairman of both the J&K International Co. and the Taiwan Hand Tool Manufacturers' Association, claims that the shortage of talent has made it impossible for domestic hand-tool suppliers to develop innovative products. He urges local manufacturers to train their own talent and develop products made of high-value light metals in order to boost their market value.

To make up for the inability of individual manufacturers, most of which are small or medium in size, to carry out marketing, procurement, and product development themselves, Hsieh' s association is organizing the association' s members to engage in these tasks collectively.

A joint marketing company was set up to promote the common "ARK" brand by eight association members, including J&K, K&W, Proxene, Apex Mfg. Co., Allprofessional Mfg. Co., and Tong Lee Industrial Co., three years ago.

The joint company is still in the red, but its results are encouraging enough that the association set up another alliance on the ARK model last year. Yih Cheng, which heads up the new grouping, has convinced other leading manufacturers to join. These include Lucky-Brand, Infar Industrial Co., and Kuang Yuang.

Alliances for Sustainability

More such alliances, Hsieh believes, will help Taiwan' s hand-tool industry find the way to sustainable development.

The Industrial Technology Research Institute (ITRI), another government-supported body, is doing what it can to help the industry. In 2004 its Mechanical Industry Research Laboratories (MIRL) unveiled a new, unique digital meter for hand tools. "This is not the ordinary digital gauge you see in other machines, " insists Li Ming-hua, a project manager in MIRL' s Precision Machines and Control Technology Division. "Our meter is able to measure torque and tension force precisely, as well as temperature and even the calories that the too user is burning on the job."

Li expects this new meter, which includes a nail-sized LCD display and sensor Ics, to add NT$16-NT$20 at most to the cost of making a tool, or just 10% to 20% of total production cost. "This is only a small cost, " the project manager says, "and it should help boost Taiwan' s share of the US$10.6-billion global hand-tool market from 20% now to 40% or so."

Taiwan shipped about US$2.2 billion worth of hand tools last year. By 2009, Li predicts, tools equipped with the digital meter will add US$1 billion annually to domestic industry' s revenues.

MIRL and a number of local manufacturers have organized more than 20 Taiwanese suppliers into a joint NT$300 million (US$9.3 million) company for the production and marketing of tools incorporating the digital gauge, which already include wrenches, pullers, and scissors. Power and manual screwdrivers will soon follow.

The partners in the new company have high praise for the digital meter, saying that it is as precise as Western-made meters while being only one-fifteenth the size. Their grouping, they add, points to a growing consensus among local suppliers that they must compete for market share collectively instead of individually, as they did in the past. (March 2006)