Wrenches Taiwanese Makers Emphasize Designs on Products

Ander Chen, chairman of Infar Industrial Co., Ltd. And chairman of the Taiwan Hand Tool Manufacturers' Association's (THTMA) wrench-industry committee, is of the opinion that domestic wrench manufacturers should emphasize design in their products, despite the higher costs. He believes there is great room for improvement in the design area.

Chen points out that Taiwan's wrench industry was born around 30 years ago, but design was not given priority until around five years ago, when an American wrench supplier first rolled out gear wrenches. "This new type of wrench is still not regulated by a specific standard, as are conventional models such as socket wrenches and box wrenches," he explains.

World specification setters ANSI and DIN, Chen notes, plan to draw up standards for the wrench next year. He continues that the setters must include the patents that Taiwanese manufacturers have won on their own designs for gear wrenches. "Until then, domestic manufacturers still have the freedom to freely introduce theitr own design variations without restriction-for everything from the number of ratchet teeth to the adjustable arm angle," he states.

Chen says that before the gear wrench was introduced, Taiwanese manufacturers in this line depended on standardized wrenches for their revenues, and OEM-based orders were their only income source. All Taiwanese manufacturers could do was follow set standards-and were not permitted to introduce any innovative changes to the products. "Thus, the gear wrench has indeed brought domestic manufacturers a degree of hope," Chen attests.

The gear wrench, the chairman states, is the most ergonomic of all wrenches, with its force-enhancing and reversible-twist features quickly bringing it popularity in the market. "Although the average price has fallen to US$2 from the initial level of US$3.5 to US$4 as a result of growing demand and concomitant economies of scale, the overall market has expanded considerably for makers in each of the past few years," he adds.

Chen opened his business in 1978. He points out that in the 10 years before his company was established, Taiwan's wrench industry enjoyed 50% to 100% export growth each year, thanks mostly to the combined effect of Vietnam War-driven demand and a recovering world economy. In the 1990s, the Taiwan industry grew by riding a growing reputation around the globe for quality, flexibility, and comparatively inexpensive contract-manufacturing capability. "Now, we make money from innovative design," he says.

However, Chen states that the cost of entry into gear-wrench manufacturing has risen markedly, with manufacturers' patents fencing opportunity off and erecting a high entry barrier. "That's why only four to five of the island's 20-some manufacturers in the wrench-making sector put out this type of wrench. Even though other manufacturers still have a chance to enter this area, they are reluctant to take the leap because they know they have to spend much more money than existing makers on coming up with unique, proprietary designs," he explains.

Whatever types of wrenches Taiwanese suppliers make, they have replaced middle-carbon steel with chrome-molybdenum steel or chrome-vanadium steel, increasing the hardness of their products. Currently, China Steel Corp. is their primary supply source for the raw materials, according to Chen, who says CSC was not able to supply chrome-vanadium steel and chrome-molybdenum steel when he opened his business. At American customers' requests, his company began using chrome-vanadium steel soon after operations began, using Kobe Steel Ltd. Of Japan as the company's supplier.

Also, no matter what types of wrenches Taiwanese suppliers make, they have continually maintained an emphasis on quality improvement. This emphasis has become even more apparent in the past six years, since the island's manufacturers began getting involved in gear-wrench production. Chen reckons that average spending on quality and design improvement now constitutes 1.5% to 2% of a big local company's annual revenue. The result has been ISO certification for many of the island's wrench manufacturers.

The quest for continual improvement is partly driven by the competitive threat from opponents in mainland China and India, which undercut Taiwanese suppliers. Chen says that Taiwanese manufacturers have shifted attention to products catering to specialty-profession workers and do-it-yourself aficionados, leaving the market for occasional users to mainland Chinese and Indian suppliers. Many big Taiwanese manufacturers, meanwhile, have opened facilities in the mainland to trim production costs.

Although the Taiwanese manufacturers have been adding more value to their products, Chen is worried that Taiwan's exports this year may only increase marginally from last year. He attributes his worries to the fact that the number of American retailers has fallen substantially as a result of mergers in recent years. "As well, major retailers are not building up inventory as they did in the past, as the market has become more unpredictable," Chen states. This shift has brought delivery-demand pressure on Taiwanese suppliers; today retailers usually ask Taiwanese suppliers to deliver goods within 30 days of receiving orders, only half the time demanded in the past, according to Chen.

With retailers reducing the size of individual orders in an effort to avoid the piling up of inventory, Taiwanese suppliers, Chen points out, have also accordingly tried to keep inventory at a minimum. To keep their production lines busy all year around, Taiwanese manufacturers have begun grabbing up small-volume orders to fill up capacity during slack periods, according to Chen.

Last year, Taiwan's wrench industry exported NT$4.1 billion (US$122 million at US$1:NT$34), surging 37% from 2001's NT$3 billion (US$89 million).