Taiwan’s machine shop

Posted on 4 Mar 2011 by The Manufacturer

Taiwan’s machine tool industry is teaching the world about the power of many working as one.

Surrounded by a bewildering array of machines, that perform every conceivable metal cutting and forming function, another show girl in hot pants and thigh high boots greets me politely in perfect English and offers another plastic bag of stuff. Young engineers with MBAs and PhDs swarm about the vast hall discussing axis moments and spindle speeds in three languages.

Welcome to TIMTOS, the third largest machine tool show in the world.

This biennial Taipei trade expo hosts most of Taiwan’s vast manufacturing technologies industry. Most, but not all – demand for booths this and last year exceeded 7,500, but only 5,100 booths were available in the space that occupies five exhibition halls across two sites. To put this in perspective, the UK’s main manufacturing technologies event, MACH, has about 500 booths.

The sheer volume of companies and the variety of machines on display is staggering. Bear in mind that Taiwan is little bigger than Belgium and, up until 1950, per capita GDP here was only $250 a year.

The country has over 600 machine tool manufacturers and 200 manufacturers of accessories, such as ball screws, tooling and bearings. More than 200 of this total are congregated in a 30-mile corridor in Taichung City. Machine tool manufacture is now Taiwan’s most important industry by value, with output of $4.8bn worth of domestic brand machine tools in 2008. That value crashed to $2.42bn in 2009 (of which exports made up $1.7bn) following the global financial crisis, but has rebounded strongly. From January to October 2010, export value of Taiwanese machine tools increased 68.4% compared with the same period in 2009.

Taiwan is now the world’s fourth largest exporter of machine tools, after Germany, Japan and Italy.

And looking ahead the country is bullish about more growth. Taiwan, known as the West’s gateway to China, already sells the biggest proportion of its machines to China. Machine tool companies want to expand further into global markets. “China is important to us, but we want to spread our exposure more evenly into Europe, India and the US,” says Chuck Chen, president of Luren, a company that makes gear cutting and grinding machines.

Some Taiwanese companies are already very well embedded in Europe. Kao Fong Machinery, for example, sells 90%-95% of its horizontal machining centres into Europe. Hiwin, a big motion controls and systems manufacturer, acquired Matrix Machine Tool in Coventry recently and Soco, the world’s second biggest tube bending brand, also bought Langbow in the UK last year.

China has always been an important market for Taiwan, but in recent years it has dominated demand – China and Hong Kong accounted for 47.2% of total export value last year. It’s a symbiotic relationship, China with its inexorable demand for manufacturing kit, the more sophisticated Taiwan with the better universities and, arguably, engineering knowhow.
With the implementation of the Economic Cooperation Framework Agreement, or ECFA, in June 2010, more Taiwanese companies can export product to China tariff-free. This has helped the machine tool sector, but so far the impact is small – of 54 items ‘related to’ machine tools on the ‘Early Harvest List’ of ECFA, only 17 are pure machine tool models.

This is being extended, says president of the Taiwan Association of Machinery Industries (TAMI) C.C Wang, and next year the trade body hopes it will cover 600 items in three, 200-item tranches, that will benefit Chinese exporters to Taiwan as well.

Quality but price stays low
Taiwanese machines claim to offer European and Japanese quality for a discounted price. While experts say that in the past Taiwan’s machinery quality was perceived to be closer to Chinese standards (i.e. not the best), today the gap with the top Japanese and European marques like Mazak and DMG has closed. How? The tools are cutting at the sub-micron level for one thing, rather than stating a finished part is between 7 and 10 microns.

And Taiwan is a hotbed of integrated innovation, from the 10 universities in and around Taipei, to research institutes, four machinery trade associations, tooling companies in the supply chain, up to the biggest machine tool makers like First Friend Group and YCM.

So should we care about all this?

Most Taiwanese machine tool companies are small, turning over a few million pounds a year. To compete with Japan and Germany they have joined forces to leverage their weight overseas. This involves sharing IP, organising and subsidising delegations to foreign trade shows and sharing student internships.

Taiwan’s trade associations like TAMI and the Taiwan Machine Tool & Accessory Builders Association (TMBA) say that Taiwanese machine tools now match European and Japanese quality but for a lower cost – in some cases less than half the cost of a comparable machine made in these regions. For metal forming/cutting/shaping companies, and plastic injection and moulding firms, Taiwan machines offer an attractive alternative to more familiar names. Many Westerners wander the show – official figures say that 2,600 overseas visitors had called in by Day Three of the six-day show.

Many Taiwanese companies have agents or distributors in the UK and some are looking for agents. It seems that the recession has realigned many companies’ sights, globally, to a more affordable manufacturing technology than the more traditional German-Swiss-Japanese-Italian solution. In India, where price drives the machinery market, richer and more discerning customers had chosen US and Japanese machines in recent years. Today, says Milton de Silva, editor and associate publisher of Industrial Products Finder, one of India’s biggest industry technical magazines, Taiwan is the most popular provenance of new machine tools with Indian companies. “Big companies prefer Mazaks, Mori Seiki/DMG’s and Hardinges when they have the budget, but Taiwan machines are the most popular overall, for the quality/cost equation,” he says.

It’s not all plain sailing for the Taiwanese, however.

The country has virtually no software engineers, a skill that is growing in demand as more CNC machine tool makers need to write their own software to apply the nuances of the cutting, milling, drilling, turning or grinding operations of their machines. It faces strong competition from South Korea and China, and machinery makers from the rest of the world who have re-priced to encourage new sales after a very stagnant two years.

But thanks to the work of bodies like TAMI, who manage to extract what support they can from the Taiwanese government, Taiwan machine tool manufacturers are in a good place. TAMI works to funnel government money to subsidise members’ attendance at international trade shows – about one a month – and to link university students and PhD programmes to local companies, to advance engineering innovations from the college lab to the factory floor.

By Will Stirling

Stand by for more detail on how Taiwan’s machinery industry is working together to take on the world.