THTMA Chairman Touts Taichung as a One-stop Shopping Hub for Hand Tools

But the industry needs government help to achieve sustainable growth

At the annual general meeting (AGM) of the Taiwan Hand Tool Manufacturers' Association (THTMA), which took place on Oct. 5, 2012, association chairman Jack Lin called for the development of Taiwan's central city of Taichung into a “Top Global One-stop Shopping Hub for Tools.”

The 2012 AGM was upbeat, with participation by more than 100 industry insiders together with government officials and representatives from different organizations such as the Industrial Development Bureau (IDB) of the Ministry of Economic Affairs; the Economic Development Bureau of Taichung; the Taiwan External Trade Development Council (TAITRA), a semi-governmental export promoter; the China Steel Corp., Taiwan's largest upstream supplier of steel; the China Economic News Service (CENS), the island's top export media; the Metal Industries Research & Development Centre, a leading R&D body; and the Chinese National Federation of Industries, an industrial association representing a majority of local manufacturing businesses.

Uncertain Outlook
In a speech to the assembled THTMA members, Lin warned that the industry's outlook has been uncertain since the fourth quarter of 2011, when overseas orders declined significantly due largely to the global economic doldrums caused by the outbreak of the EU debt crisis and the slowdown of growth in the U.S.

The gloomy business climate has yet to brighten appreciably; in fact, it is likely to linger on for some time. Lin said that after finishing the first half of 2012 with a moderate export growth despite the sluggish global economy, the industry remains pessimistic, partly because in April the government approved local electricity and fuel price hikes that increase operating costs for the industry.

Furthermore, Lin cited reports by local and foreign market researchers in saying that the unimproved unemployment situation in the U.S. and the EU, the end of China's credit-easing mechanism, and hikes in international prices of raw materials have cast a cloud over hopes of global economic recovery.

Lin also slammed the government for not making any progress in follow-up negotiations with China on the Economic Cooperation Framework Agreement (ECFA), which have almost stalled since the agreement came into effect in early 2011.

“The signing of ECFA was originally regarded as helpful for Taiwan in building more global ties by forging FTAs (free trade agreements) with other trade partners, but the bureaucrats behind the slow follow-up talks have disappointed us,” lamented Lin, who added that the expected windfall of ECFA benefits now looks fanciful and unrealistic. With Taiwan gradually being marginalized in global FTA development, THTMA will step up its assistance for Taiwan's hand tool makers in their effort to build sustainable growth themselves instead of looking to the government for help.

Emerging from the Clouds
Knowing that God helps those who help themselves, the THTMA is striving to lead the industry out from under the clouds of gloomy development.

One of its strategies is to organize participation in prominent international hardware and hand tool fairs; and, Lin said, this effort is paying off in the form of recognition by the Bureau of Foreign Trade, which provided NT$17.81 million to THTMA to subsidize participation in exhibitions in 2012. The Taichung City Government provided more than NT$20 million to boost the industry's global profile; part of the subsidy was used to set up an “industries in Taichung” theme pavilion at the China International Hardware Show 2012, held on Sept. 19-21 in Shanghai.

While organizing trade missions to emerging markets such as India, the THTMA has strived to expand the industry's outlets in Asia-Pacific and Southeast Asian markets by joining forces with local commercial and industrial organizations. For example, Lin reported, in 2012 the THTMA participated in the establishment of the Federation of Asia Pacific Hardware Chambers, which is expected to open the door to the ASEAN (Association of Southeast Asian Nations) market more widely for Taiwanese hand-tool makers.

Building a One-Stop Shopping Hub in Taichung
To burnish the image of the Taiwanese hand tool industry, Lin wants to take advantage of the dense industrial cluster in the Taichung area, which accounts for over 80% of the hand tools manufactured in Taiwan, to turn Taichung into a one-stop shopping center for global buyers.

To that end, Chairman Lin plans to inaugurate a professional hand-tool trade fair in Taichung. “Arrangements and organization are going very well so far,” he reported, “so we believe that the inaugural trade fair will take place in Taichung as scheduled in mid-2013. The biggest feature of the show will be to provide foreign buyers easy access to the industry in Taichung area, where the high producer density will help them to source Taiwan's top-end, high-quality hand tools within just an hour's drive.”

The establishment of a hand-tool museum is another part of Lin's agenda. This plan is currently behind schedule; but Lin insists on the importance of the museum, saying that it can build recognition of and familiarity with Taichung, the birthplace of Taiwan's hand-tool industry, among foreign buyers.

The success of the one-stop shopping hub plan will rely on assistance from the local government. D.S. Wang, director-general of the Taichung Economic Development Bureau, said in his AGM speech that since the industry has served as a growth engine for the local economy, the government is doing its utmost to help the THTMA organize a hand-tool trade fair in the city.

“Over the past year,” Wang stated, “the government has offered the THTMA NT$10 million in subsidies for promoting Taiwan hand tools worldwide. We hope the planned trade fair will not only strengthen the industry's global competitiveness, but will also boost the image of Taichung and fuel local economic growth in the future.” He promised that the government will further exchange views with industry insiders and specialists, in addition to providing necessary resources and assistance, to make sure that the inaugural trade fair makes an impressive debut in 2013 and then outpaces similar overseas exhibitions in quality and business access.

The Future Will Be Brighter
Generally speaking, THTMA's Chairman Lin remains optimistic about the future of his industry. He explained that with the structure of the world economy changing, global trade getting brisker, and consumers in emerging countries surging in number, Taiwanese hand tool suppliers have gained a solid reputation in the developed countries over the past decade, thanks mainly to their diligent efforts to upgrade quality and technology.

Moreover, despite being troubled by the underselling of DIY-caliber hand tools from China, Lin said, Taiwanese hand tool makers have seen a return of export orders in recent years primarily because of China's rising wages, shortages of ordinary workers and high-level technicians, and the stereotype among foreign buyers of low-end products. These factors have helped Taiwanese manufacturers to gradually level the field for competition with Chinese rivals.

To ride out this transition, Lin urges Taiwanese makers to expand their markets from China, Japan, South Korea, and Southeast Asia to include the Middle East and Central and South America, while maintaining sound partnerships with customers from the U.S. and Europe. In addition, he said, local manufacturers should also step up production automation in order to increase their output and solve worker shortages at home, and to integrate their resources so that they can better adapt to an ever-changing market. “In doing this,” he commented, “the industry is likely to be better prepared for a sustained annual export growth of over 30% in the future.”

Other Highlights
Among the other highlights of the THTMA's AGM were promises made by IDB Director-general J.C. Shen to help optimize the industry's future development. The government, he said, will try to finalize the inclusion of hand tools in its MIT Smile Project within a year, help insiders with talent incubation, assist manufacturers in introducing higher-end steel materials to upgrade their product mix, and promote cooperation between Taiwan and Japan or the U.S. on technology and market development.

“Tools (including power tools) are a promising industry and a generator of exports for Taiwan, with total export revenue in 2011 reaching over US$3.2 billion,” Shen said. “So the government will place more emphasis on the sustainable development of the industry.”

H.C. Lee, chairman of Deamark Ltd., a tool distributor and trader founded in 1969, was invited to give a lecture at the AGM about the threats and opportunities faced by Taiwan's hand tool industry.

Instead of worrying about underselling by Chinese suppliers in the global market, Lee said, Taiwanese makers should be more focused on expanding their patent portfolios by engaging in the development of value-added materials and chromatics and by introducing 3D technologies in product R&D. “After years of dedication,” he commented, “some Taiwanese manufacturers have successfully profited from the development of patents. “These efforts, I believe, are pointed in the right direction and will help establish better profiles vis a vis our Chinese rivals.”

At the same time, Lee noted, Taiwanese makers should be more confident in their products, especially sockets: “Taiwanese socket manufacturers who use cutting-edge cold forging technology have won high regard from Japanese counterparts, who utilize hot forging in production. This is a result of their decades-long devotion to continuous improvement of technology and it will surely reward the industry in the long run, especially since the demand for sockets has grown steadily in the vast market for car production and maintenance worldwide.”