15 May 2017
Taiwan's Machinery Sector Bids for Wider Global Recognition
Long eclipsed by the territory's successes in the electronic information and semi-conductor sectors, Taiwan's machinery industry is keen to stake its claim as a global export success story and a world leader in several niche markets.
Taiwan's global reputation as a 'sci-tech island' is very much based on the success of its electronic-information industry and, in particular, the pioneering work of its semi-conductor sector. Its high-tech pre-eminence, however, has often eclipsed a number of other Taiwanese industries, most notably its machinery sector.
In fact, machinery products of Taiwanese origin are sold all over the world and account for the bulk of the territory's exports. This year, the output value of this sector is tipped to exceed NT$1 trillion (US$33 billion), underlining its role as a key driver of economic growth.
Taiwan's machinery sector first began to flourish in the immediate post-World War II period. Throughout the 1940s and 1950s, the manufacture of consumer goods and light industrial items were the staples of the sector, with food processing and textile-production equipment predominating – notably oil presses, rice mills, textile systems and sewing machines.
This changed in the 1960s and 1970s, partly in response to the global energy crisis and also on account of the transformation of Taiwan's own industrial base. This saw the territory's output shift to machine tools, production machinery and transportation.
A more managed approach to the sector came about in the 1980s, as the territory's government mandated a six-year infrastructure-development programme, as well as moves to nurture 10 emerging industry sectors, including a specific focus on the provision of electronic information. In line with this, the output of the machinery industry was geared more towards the production of high-tech products, including precision machine tools and semi-conductor equipment, as well as a number of other key components and parts.
More recently, along with other major industrial producers across the world, the focus has been on computerisation, digitalisation and intelligentisation. Following her election as the territory's President in 2016, Tsai Ing-wen's administration has made intelligent machinery a priority, a move very much in keeping with Industry 4.0, the global drive for the development of smart factories.
At present, the machinery sector is Taiwan's third-largest industry in terms of output value, trailing only semi-conductors and petrochemicals. In total, the territory is home to 13,000 machinery plants, together employing some 300,000 people.
In 2016, according the Taiwan Association of Machinery Industry (TAMI), the output value of the local machinery industry was some NT$990 billion, a 3.6% year-on-year rise. In total, exports accounted for NT$681.8 billion of that figure, a 0.1% increase on 2015.
This year, indications of a global economic recovery have boosted the machinery sector, with exports up by 11.2% to NT$170 billion. As the New Taiwan Dollar appreciated 6% against the US dollar over this period, however, the actual year-on-year growth rate was only 4.9%.
According to Alex Ko, the Chairman of the TAMI, the Taipei International Machine Tool Show, back in March, resulted in a flood of orders for local businesses. A similar windfall is also expected from several events in mainland China and Europe. As a consequence, Ko expects overall output and export value to grow by 5-10% this year, with total output likely to be valued in excess of NT$1 trillion.
In line with this, Taiwan's machinery industry is seen as a truly global player. Overall, it ranks second in the world for the export of shoe-making machinery, fourth for the export of machine tools, fifth for textile machinery and sixth for plastics and rubber machinery. Although many of Taiwan's traditional industries, such as shoe-making, textiles, plastics and rubber, have relocated to mainland China or Southeast Asia in the past 20 years or so, many of these businesses still rely on Taiwanese manufacturers for machinery and equipment.
In terms of Taiwan's machine-tools sector, Fair Friend is very much the market leader. In recent years, the Taipei-headquartered business has been a major player on the mergers and acquisitions circuit. This has seen DMC (South Korea), Pfiffner (Switzerland) and two German companies – MAG and Wohlenberg – become part of the Fair Friend empire, and the company become the world's third-largest machine-tool manufacturer, trailing only Germany's DMG and Japan's Mazak.
Fair Friend is also the world's number-one manufacturer of both vertical machining centres and automotive machine tools, while ranking second for aerospace machine tools, third for nuclear-power generation and new-energy machine tools and fifth for rail transport. According to Chairman Jimmy Chu, all of the machine-tool technology the company has gained access to in recent years, through its mergers and acquisitions in Europe, North America, Japan and South Korea, will ultimately be transferred back to Taiwan.
In terms of the future development of the wider industry, a government-backed smart machinery industry park is set to be established as part of the second phase of the Shengang Fengzhou Technology Park in central Taiwan. Scheduled to be completed in 2018, some NT$70 billion has been invested in the park, which will provide facilities for about 50 companies.
Despite government backing and a number of existing success stories, the biggest challenge facing Taiwan's machinery industry is competing with many of the innovative technologies being developed by its overseas competitors, most notably in Japan and Germany. In two of the key sectors – artificial intelligence and automation/robotics – Taiwan still lags considerably behind the market leaders, with the technology level of most of the territory's factories very much at the medium to low end of the spectrum.
In order to make up this shortfall, plans are now in place to enhance the territory's ability to compete in a number of key technological areas. This will see industry, the state and Taiwan's academic sector working together on a number of smart machinery-related R&D projects.
In terms of the machine-tool sector, Taiwan's leading players include Fair Friend, Tongtai, Goodway, Chin Fong, Yeong Chin, Taichung Machinery Works, Litz Hitech Corp and She Hong Industrial. In the shoe-making machinery sector, the local industry is headed by Ding Sheng, Horng Chii, Ye Hone and ChenFull. In the case of textile machinery, Pailung, Asia Kingdom, Acme, Jen Haur and CCI Tech are the key businesses. With regard to plastics and rubber machinery, Multiplas, Huarong, Horng Tair and Sunkist Chemical Machinery take the lead.
Robert Kang, Special Correspondent, Taipei