Lian Yu Sees Bright Future In Rubber Seals

John Shih established Lian Yu Oil Seal Enterprise Co. in 1979 and guided it through boom times and bust until it has become, today, one of Taiwan's top makers of rubber seals for automobiles and heavy machinery.

The ISO9000:2000-certified company, of which Shih is chairman, supplies a wide range of rubber seals with diameters of 5mm to 600mm: oil seals, stem-valve seals, bonded seals, shaft seals, rod seals, rubber packing, and high-end O-rings, mainly for Japanese and European cars, motorcycles, heavy-duty vehicles, and industrial machinery. The company has developed more than 8,000 seal models, giving it the most comprehensive range of automobile seals in Taiwan, and develops 300 to 400 new models every year.

"Know-how and experience with rubber materials are the core factors in determining the competitiveness of a rubber seal maker," Shih comments, "because rubber formulas greatly affect the quality and durability of seals, which are often used at locations that rotate frequently and have to keep oil in and dust out in high-temperature, high-pressure environments. Most of the cost of changing seals in an automobile or machine is not the seals themselves, but the cost of labor and the down time of the machine.

"The quality and reliability of an oil seal is vital, because seals are closely related to the safety, efficiency, and durability of an automobile or a machine. So most auto and machinery makers will not easily switch their original-equipment (OE) seal suppliers."

Lian Yu has dealt with this situation by concentrating on aftermarket-replacement parts, even though the company claims that the quality of its products equals or surpasses that of OE products.

Shih works with several other professionals in an R&D team that carries on research in new formulas. The team has developed over 12 of its own formulas for making rubber seals, the chairman says, for use in various climates, working environments, and pressures. Most companies, by contrast, use only one or a handful of formulas to turn out standardized seals.

The Importance of Formulas

"We manufacture seal products according to customers' needs," Shih stresses, adding that the use of the right formula is essential because the humidity, temperature, and even operator habits vary in different parts of the world. Lian Yu also develops and makes seals under the stringent DIN 3760 international standard, if its customers so specify.

Lian Yu's seals are popular with buyers in Europe, the United States, and the Middle East who need high-quality, reasonably priced products. Thanks to the reputation for quality that the company has earned in the international market, it is winning more and more large original-equipment manufacturing (OEM) orders from big auto-parts brands in the U.S. and Europe.

The company currently produces about 25 million units per year; 80% are marketed internationally under Lian Yu's own LYO brand, and the remaining 20% are sold on an OEM basis mainly to European and American customers.

"We do face competitive pressure," Shih concedes, "mainly from low-priced rivals in South Korea, mainland China, and India. But I see such pressure as a positive force that drives us to weed out low-margin, low-technology products and improve our R&D and manufacturing capabilities." Taiwanese seal makers are about 10 years ahead of their mainland Chinese rivals in terms of technology and quality, he claims.

Market trends favor the expansion of companies such as his own, Shih says, as most big international brands strive to develop the rapidly growing Indian and Chinese markets with products featuring reliable quality but high prices. But those brands have been closing down production in their home countries and, to cut costs, are increasingly placing contract orders with suppliers in Asia, especially Taiwan.

"That partly explains our high sales growth in recent years, including our improvement of more than 40% last year," Shih goes on. "To further lengthen our lead over rivals in Asia, we have been working hard to upgrade our production technology so as to give our products better finishing, higher precision, and better materials formulas. We've also been investing intensively to update our manufacturing and testing equipment so that we can become a real world-class producer."

The Machinery Advantage

Taiwan's world-leading capability in developing and producing industrial machinery (the island is reputedly the world's largest supply base for seal-production machinery), Shih says, further strengthens the quality and cost competitiveness of its seals. And this, of course, adds to the image for high quality and durability-and higher prices.

For this reason, the chairman explains, Lian Yu and most other rubber-seal producers in Taiwan have no plans to move product to other low-cost nations but are expanding their production capacity on the island. The capacity of Lian Yu's 65-worker plant in Taichung, central Taiwan, is completely filled already, and sales are expected to continue growing explosively because of increasing OEM orders.

"Like the auto and machinery makers in the industrially advanced nations, which will not easily switch their suppliers of rubber seals," Shih insists, "almost all of our existing customers will continue relying on use for high-quality, competitively priced rubber seals. In the rubber-seal line, quality can be determined only by performance and not by appearance, and that's why brand loyalty is so high in this business."

Shih modestly attributes his high sales growth last year-more than 40%--to increased global demand in anticipation of rising materials prices, but he is confident in the future of Lian Yu if the company can only constantly upgrade itself and remain competitive.

'The rubber-seal market is unlimited because demand never stops expanding," he explains. "In the past, there were no major changes in the appearance, type, and functions of rubber seals, but only in the functional materials used to make them. This means that in decades to come, our products will keep their shape and function, with changes only in materials or improved durability and quality. The market, and growing demand, will always be there."