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Foreign Markets Taiwan's Mechanical Engineering Industry Relies on Smart Technology

Author / Editor: Manik Mehta* / Alexander Stark

By resorting to “Smart Technology”, Taiwan's mechanical engineering industry aims to establish a solid position on the global markets. Artificial intelligence plays an important role in this strategy. Due to this strength as well as its competitive and broad product range, Taiwan can now stand up to the established mechanical engineering countries such as Germany, Switzerland and Italy.

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Machines become smart: At the Timtos trade fair, the manufacturer FFG presented numerous solutions for digitalization efforts.
Machines become smart: At the Timtos trade fair, the manufacturer FFG presented numerous solutions for digitalization efforts.
(Source: FFG)

Digitalization is a high priority for the island. The digital economy is being driven forward and is making itself felt in all areas of life. The government and the Taiwan Association of Machinery Industry (Tami) are also committed to the development and production of high-quality semiconductors for AI applications.

Taiwan Stems Billion-Dollar Investment in Artificial Intelligence

“We also attach importance to software development and information security. The government also acknowledges this,” says a Tami representative. To this end, Taipei adopted the Taiwan Artificial Intelligence Action Plan in early 2018. Among other things, the plan provides for a budget of almost $ 1.23 billion. The money will be used between 2018 and 2021 to improve personnel and regulatory conditions as well as for research and application of artificial intelligence.

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In an interview with MM Maschinenmarkt, Tami Chairman Alex Ko explains that concepts such as “Smart Technologies” and “Smart Manufacturing” go hand in hand. “Artificial intelligence plays an extremely important role in this process. As a country that is heavily dependent on exports, Taiwan achieved a record export volume of $ 27.4 billion in all segments of the mechanical engineering industry in 2018,” says Ko. He points out that Taiwan, with a population of 23 million, is a relatively small market and therefore highly dependent on exports. “The key to future growth and success is smart manufacturing,” the Tami boss is convinced.

Trade War Between USA and China Forces Taiwan's Companies to Rethink their Approach

According to Ko, the trade war between the US and China has forced many companies that have been building their production facilities in mainland China for decades to seek new locations in Southeast Asia. Vietnam is regarded as an attractive production location because of its low production and labor costs. “China's position as the world’s factory can no longer be sustained due to higher labor costs and trade tensions with the USA,” says Ko.

“The trade war between the US and China will have a negative impact on Taiwan's mechanical engineering industry in the short term, but in the long term it would be good for our industry,” the Tami boss continues. This opinion is also shared by the mechanical engineering industry. Taiwanese companies that participated in the Taiwan Smart Manufacturing Media Day in Taipei told MM Maschinenmarkt that robots and automation as the backbone of smart manufacturing will pave the way to enter new markets.

Custom-Made Robot Arms from Taiwan also Popular in Europe

Techman Robot Inc. is based in Taichung City and specializes in the production of tailor-made industrial robots. “For instance, our TM robot arm features an intelligently integrated visual system that is unique in the world. The robots are also known in Europe and North America, where we have already established a strong market presence. We are looking for new sales markets in the Southeast Asian region,” says company boss Haw Chen.

Delta, based in Taoyun, specializes in industrial automation and has set up a modern research center, offering systems such as CNC, Scara robots and similar solutions. The company, which also offers integrated tailor-made software products, has offices in Europe and the USA and is building a factory in Krishnagiri in the Indian state of Karnataka.

The head of Delta's international sales department, Lisa Shu, is "very confident" about “Smart Manufacturing”. This pioneering technology will revolutionize the mechanical engineering industry. "Our collaborative robots are big sellers," reports Shu.

The Fair Friend Group (FFG), also based in Taichung, produces a variety of machine tools for the automotive industry under the brand name Feeler. “Car manufacturers account for 35 % of our sales. Our customers include BMW, Audi and Mercedes-Benz. The second most important customer group is the energy sector, followed by elevator manufacturers. Meanwhile we also supply the aviation industry and produce parts for the aircraft engines of commercial aircraft and military combat planes. The customers of our machine tools are mostly manufacturers of parts and components who sell their products to the aviation, automotive and energy sectors. The company has launched a new series of machining centers,” explains FFG Sales Director Andy Hung.

Hiwin Wants to Go Beyond Taiwan

Headquartered in Taichung, Hiwin Technologies Corp is a leading robotics company with six factories in Taiwan and ten offices in Japan. The company also operates a production facility and research and development centers in Germany, Switzerland, the USA, the Czech Republic, Singapore and South Korea. Their extensive product range also includes products such as recirculating ball screws, linear drives, single-axis and multi-axis bearings as well as medical devices and equipment. Derek Tsai, Senior General Manager, said the company's robots and automation concepts were so popular that the company decided to exhibit at the Hanover Fair. German and other European buyers also visited the Hiwin stand at the fair.

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Rebecca Hsieh, Vice President (Sales) at Goodway Machine Corp. in Taichung, announced that the company plans to build a new factory in China. Their vertical lathes and grinding machines are appreciated in foreign markets. “We also deliver turnkey projects. Europe is our most important market and accounts for around 30 % of our exports. Nearly 20 % of our employees work in research and development. The company spends about 5 % of its revenues on research and development. Our products are known worldwide for their quality standards,” says Hsieh.

Goodway Machine Corp. will exhibit CNC turning centers and automation products at EMO Hannover 2019. According to Hsieh, the company's marketing strategy for European customers includes establishing an inventory platform and a cloud service system.

Quaser Primarily Sells from Taiwan to Europe

The Quaser Machine Tools Inc. group, also based in Taichung, wants to improve the precision of its machines. “Our markets are mainly in Europe,” says Rock Liao, president of the company. “Our competitors are mostly Japanese suppliers. Our products in the automation sector belong, like those of the Japanese, to the medium and high-quality category. We have three overseas centers - in St. Gallen (Switzerland), in Rock Hill (South Carolina, USA) and in Kunshan (People's Republic of China). 80 % of machine tools manufactured in Taiwan are exported, but the export share of Quasar is 90 %,” says Liao.

Quaser’s president also notes that European companies are increasingly being targeted by Asian companies buying up European companies because of their technology. Quaser builds machines for major brands such as Masuda, MAP or Windbrough. “Labor costs are rising at an average annual rate of 3 %. Taiwan can build factories, but there is a lack of space. Taiwan's labor costs are only 15 % higher than that of China, but the country is much more expensive. 60 % of the machines produced by Quaser are exported to Europe. But Asia is also becoming increasingly important. The company's digitalization process has progressed so far that it has already become 70 % paperless,” says Liao.

Taiwanese machine suppliers are following the trade dispute between the USA and China with great interest, as Taiwan is reorienting itself on the world markets anyway. The dependence on the huge Chinese market is not without risks for Taiwan, as it can have long-term political consequences for the island.

Taiwan's Politics Looking for Alternatives to China

The government has developed a “Southbound Policy”, in which the search for new markets in Southeast Asia and South Asia (mainly India) is to be intensified, reports Walter Yeh, Chief Executive Officer of the Taiwan External Trade Development Council (Taitra).

According to Taitra, there are approximately 80,000 Taiwanese companies in China, most of them small and medium-sized. Many of them produce machines, electronics or automation equipment. The products are supplied to a wide range of industries, particularly the automotive and aerospace industries.

“Taiwan is the world's fourth largest supplier of machines, parts and components which are manufactured with advanced technology and artificial intelligence. The two most important industries in our country are information technology and mechanical engineering. These exports amount to $ 4 billion per year. We have a network of more than 1,000 precision machine manufacturers,” says Yeh in an MM interview in Taipei.

Given the trade tensions between the US and China and the global nature of supply chains, many importers in key markets are looking for alternative sources. The “Southbound Policy” is gaining importance: Supported by the government, Taiwanese companies are expanding their presence in the Member States of the Community of South East Asian States Asean (mainly Vietnam, Indonesia, Malaysia and Thailand), but also in India.

Taiwan Wants to Become a Global Hub of Smart Manufacturing

“With the restructuring of global supply chains, South Asia and the Asean Community have experienced strong growth in recent years. The Asean Community is Taiwan's second largest export and investment destination. We already cooperate closely in the areas of technology, trade and business,” reports the Taitra President.

In view of the growing global protectionism, Yeh says he expects production facilities to be moved to new locations in the near future. But the small and medium-sized enterprises from Taiwan can also benefit from orders coming from the new markets for electronics and machinery.

The organization's efforts are aimed at establishing Taiwan as a global hub for smart manufacturing. By promoting this hub, the government also intends to focus on the recruitment and training of skilled personnel. Apart from that, the digital infrastructure is also to be strongly promoted through an existing AI government initiative.

This article was first published by MM MaschinenMarkt.

Original by Stéphane Itasse / Translation by Alexander Stark

* * Manik Mehta is a freelance journalist from New York (USA)