Teco Announces Ambitious Investment Plans

Taiwan's Teco Electric and Machinery Co. has announced four ambitious expansion projects which will together make it the largest manufacturer of industrial motors in the world. It is already the third biggest, with estimated sales of NT$18 billion (US$530 million at NT$34:US$1) worth of industrial motors in 2003. This was nearly 7% of the global market.

The company is now in negotiations regarding the acquisition of one of the top five motor makers in Europe. If the negotiations are successful, Teco's combined sales are expected to reach NT$30 billion (US$882 million) in 2004, surpassing sales by ABB, which currently has an 11% share of the world market, and Siemens, which has a 7% share.

According to Teco's senior vice president, J. George Lien, the company hopes to acquire a 51% stake in the European manufacturer and thus acquire its customers, eight or nine factories, and sales channels.

Another Teco plan is to set up a 216-million-square-foot science and technology park in the mainland Chinese city of Wuxi, where the Taiwan company already operates an industrial-motor plant, with an initial investment of US$100 million. This will be the company's largest investment to date in the mainland.

The new Wuxi facility will manufacture communications devices, consumer-electronic products, business machines, and audio and video products, and will also provide electronic-manufacturing services. Many of Teco's affiliated companies and vendors will set up plants in the park, where production is expected to begin by the end of this year.

Total investment in the new park and in the European motor manufacturer will top NT$10 billion (US$294 million), reports a senior Teco executive. Further investment in Wuxi is likely, if things go smoothly there. Teco chose that location because of its proximity to Shanghai and Suzhou, where many Taiwanese-invested firms are clustered.

The existing Wuxi plant is also in line for an expansion that will boost its annual production capacity from 200,000 to 350,000 industrial motors. The expansion is scheduled for completion in the fourth quarter of this year. A further expansion plan involves the merging of small and medium-sized industrial-motor plants in Hebei Province, and the establishment of another motor plant in northeastern China in the first quarter of 2004, with the aim of consolidating Teco's market in that part of the country.

In addition, the company is planning to set up its first plant in eastern China for the production of compressors for air-conditioners. The new plant will cost US$10 million and go into production in the third quarter of this year.

In the southern part of the mainland, Teco will expand its Dongguan plant by adding a maintenance facility for industrial motors. The company is also considering the feasibility of setting up plants in Shanxi or Sichuan provinces to serve the market in western China.

Teco is not limiting itself to China and Europe; it is also negotiating with a Japanese company for the development of that company's home market where, Lien notes, annual sales of industrial motors are estimated at NT$60 billion (US$1.76 billion). Initial plans call for Teco to manufacture motors for the Japanese company on an ODM (original design manufacturing) basis; later on, a joint venture will be set up to manufacture industrial motors in Japan itself. Teco's target is to win 5% of the Japanese market next year.